Gold Expected to Soften in 2015 as US Recovery Deepens

Gold is stable on Wednesday, with a spot price of $1199.55 per ounce in the European session. In the US, today’s key event is Unemployment Claims, which will be released ahead of its usual Thursday slot due to New Year’s. We’ll also get a look at Chicago PMI and Pending Home Sales.

Gold is ending the year right where it started, at the key $1200 level. The metal hit the 2015 high of $1388 in March, but was unable to stay at this lofty level for very long. Gold has struggled in recent months as the dollar has surged on the currency markets and commodities such as oil have taken a hit. With the US recovery deepening and the Federal Reserve likely to raise rates in the first half of next year, we could see the metal lose more ground against the greenback in early 2015.

With the US economy showing better numbers as we head into 2015, the US consumer is showing more optimism about the economy. On Tuesday, CB Consumer Confidence rose to 92.6 points, up from 88.8 a month earlier. Although this missed the estimate of 94.6, this was a solid reading which follows last week’s UoM Consumer Sentiment report. That indicator has been on an upward swing and hit 93.6 points in December, its highest level since February 2007. Consumer confidence numbers are closely watched, as increased confidence should translate into more spending by consumers, creating more jobs and strengthening economic activity.

XAU/USD for Wednesday, December 31, 2014

XAU/USD December 31 at 12:05 GMT

XAU/USD 1198.15 H: 1203.79 L: 1195.85

 

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1130 1156 1175 1200 1215 1240

 

  • XAU/USD has shown little movement in the Asian and European sessions. The pair continues to trade close to the 1200 level.
  • 1200 is a weak resistance line and was tested in the Asian session. 1215 is stronger.
  • 1175 is an immediate support line.
  • Current range: 1175 to 1200

Further levels in both directions:

  • Below: 1175, 1156, 1130 and 1111
  • Above: 1200, 1215, 1240, 1255 and 1275

 

OANDA’s Open Positions Ratio

XAU/USD is pointing to gains in short positions on Wednesday. This is not consistent with the pair, which has shown very little movement on the day. The ratio has a majority of long positions, indicative of trader bias towards gold breaking above range and moving to higher ground.

XAU/USD Fundamentals

  • 13:30 US Unemployment Claims. Estimate 287K.
  • 14:45 US Chicago PMI. Estimate 60.2 points.
  • 15:00 US Pending Home Sales. Estimate 0.6%.
  • 15:30 US Crude Oil Inventories. Estimate 0.2M.
  • 17:00 US Natural Gas Storage. Estimate -37B.

*Key releases are highlighted in bold

*All release times are GMT

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.