Gold prices have steadied on Tuesday, trading at a spot price of $1071.95 per ounce in the European session. After impressive gains late last week, gold has reversed directions. In economic news ,today’s key event is JOLTS Jobs Openings, with the markets expecting the indicator to improve to 5.59M. Earlier, the NFIB Small Business Index slipped to 94.8 points, short of expectations.
Gold posted strong gains late last week, taking advantage of the surprise ECB decision and a positive US NFP report. The metal moved higher after the ECB shocked the markets in its decision not to add further monetary stimulus to kick-start the ailing Eurozone economy. The markets had expected some significant monetary measures from Mario Draghi and company, but the head of the ECB played it safe, opting to do little more than tweak current monetary policy. The ECB announced that the interest on deposits would be lowered from -0.20 to -0.30 percent, and the QE asset purchase program of EUR 60 billion/year would be extended for an additional six months, to March 2017. Given the lethargic Eurozone economy, the markets had expected much more, such as substantial increase to the asset purchase program or reductions to other interest rates. The lack of any substantial moves by the ECB clearly caught the markets by surprise.
With a Federal Reserve rate hike widely expected next week, Friday’s Nonfarm Payrolls report took on added significance. The key indicator dropped to 211 thousand in November, much lower than the previous release of 271 thousand. Still, this was good enough to beat the estimate of 201 thousand. This indicator is often a market-mover, and the positive reading will lend support to Federal Reserve policymakers who are in favor of raising interest rates later this month. The Federal Reserve will obviously not confirm that a rate hike is imminent, but Fed chair Janet Yellen testified on Capitol Hill on Thursday, and signaled that a rate increase is likely in December, barring some unforeseen disastrous economic data before the rate decision on December 16. Last week, Yellen added that the Fed is satisfied with the progress shown by the US labor market and “looked forward” to a rate hike. Persistently low inflation levels have hampered the recovery and are well below the Fed target of 2 percent, and is a key reason why the Fed did not raise rates earlier this year. However, Yellen stated that she expects inflation numbers to improve, so weak inflation is unlikely to be an impediment to an historic rate hike, with Fed Funds futures pricing in a 79% chance of an increase.
US PMI reports, key gauges of economic activity, had a disappointing week. On Tuesday, ISM Manufacturing PMI slipped to 48.6 points in November. This figure fell short of the estimate of 50.6 points, and marked the first contraction of the index since May 2013. Recent manufacturing releases were also soft, as the US manufacturing sector continues to struggle. There wasn’t any relief from ISM Non-Manufacturing PMI on Thursday, as the index slipped to 55.9 points, well short of the forecast of 58.1 points. This marked a six-week low for the indicator. The silver lining is that although the index took a hit in November, the reading was still above the 50 line, indicative of expansion.
Tuesday (Dec. 8)
- 11:00 US NFIB Small Business Index. Estimate 96.6 points. Actual 94.8 points
- 15:00 US JOLTS Job Openings. Estimate 5.59M
- 15:00 US IBD/TIPP Economic Optimism. Estimate 45.2 points
*Key releases are highlighted in bold
*All release times are GMT
XAU/USD for Tuesday, December 8, 2015
XAU/USD December 8 at 13:00 GMT
XAU/USD 1071.95 H: 1075 L: 1067
- XAU/USD showed limited movement in the Asian session and has posted slight losses in the European session.
- There is resistance at 1080.
- 1043 is providing strong support.
- Current range: 1043 to 1080
Further levels in both directions:
- Below: 1043, 1024 and 980
- Above: 1080, 1098, 1134 and 1151
OANDA’s Open Positions Ratio
In the XAU/USD ratio, long positions continue to maintain a solid majority (66%). This is indicative of strong trader bias towards gold prices moving to higher levels.
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.