Gold Shows Little Reaction to ECB Remarks, Positive US Numbers

Gold has posted small gains on Friday, as the spot price is $1162 per ounce early in the European session. In economic news, ECB head Mario Draghi hinted that the ECB would likely take further easing measures before the end of 2015, causing EUR/USD to drop sharply. In the US, Unemployment Claims beat the estimate for a third straight week and housing numbers looked sharp. There is only one US release to wind up the week, Manufacturing PMI. Little change is expected in the October report.

There was positive news out of the US on Thursday, as Unemployment Claims, a key release, came in at 259 thousand, beating the estimate of 266 thousand. This was slightly higher than the previous reading of 255 thousand, but marked the third straight week that the indicator beat the forecast. The four-week moving average of claims, which reduces the volatility of the weekly jobless reports, is currently at its lowest level since 1973. These figures point to a stronger labor market, but the next big test comes in early November, with the publication of Nonfarm Payrolls. Meanwhile, Existing Housing Sales had a banner September, improving to 5.55 million, crushing the estimate of 5.38 million. We’ll get a look at additional housing indicators next week.

The euro can’t be blamed for cringing whenever ECB head Mario Draghi holds a press conference, and Thursday was no exception, as the continental currency dropped sharply, closing the day below 1.11 for the first time since mid-August. Draghi didn’t actually announce new easing measures, but strong hints that the ECB would take action in December was enough to spark a huge euro selloff. The ECB held the benchmark rate at 0.05%, but said that a rate cut was a possibility, and that a cut to deposit rates (currently at -0.2%) were also discussed. As for quantitative easing (QE), which has been the ECB’s “weapon of choice” this year, Draghi said the program would continue in 2016 or beyond, if needed. Under the current QE program, the ECB is purchasing assets at the rate of EUR 60 billion/mth. Any increase in QE levels would send interest rates lower and hence push down on the euro. This was underscored in March of this year, when the euro plunged to 10-year lows after the ECB introduced QE. The markets will now be on alert for further easing measures from the ECB, and any hints in this regard from Draghi or other ECB policymakers could send EUR/USD tumbling yet again.

XAU/USD Fundamentals

Friday (Oct. 23)

• 13:45 US Flash Manufacturing PMI. Estimate 52.8 points.

*Key releases are highlighted in bold

*All release times are GMT

XAU/USD for Friday, October 23, 2015

USD/CAD October 23 at 9:40 GMT

USD/CAD 1172 H: 1175 L: 1164

XAU/USD Technical

• XAU/USD has posted slight gains in the European session.
• 1162 remains a weak support line.
• On the upside, 1180 is under pressure and could be tested during the day.
• Current range: 1162 to 1180

Further levels in both directions:

• Below: 1162, 1151 and 1134
• Above: 1180, 1192 and 1204

OANDA’s Open Positions Ratio

XAU/USD ratio remains close to an even split between long and short positions (52:48) on Friday, indicative of a lack of trader bias regarding which direction gold will take next.

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.