Gold Posts Losses, US Jobless Claims Climbs

Gold prices has posted considerable losses on Thursday, as the metal trades at $1080.80 an ounce in the North American session. On the release front, US Unemployment Claims disappointed. The key indicator rose to 281 thousand, above the estimate of 275 thousand. On Friday, there are a host of key US releases, led by Retail Sales and PPI.

Gold has retracted this week, following excellent gains during the first trading week of 2016. Last week, gold was the beneficiary of a move by jittery investors who dumped risky assets in favor of safe-haven assets like gold. The Chinese stock market meltdown and tensions in Korea and the Persian Gulf bolstered gold, which traditionally is a safe-haven asset and often rises in value during times of uncertainty. Even with this week’s reversal, gold has still posted gains in January, and further trouble in China, the world’s second largest economy, could propel the metal upwards.

With the Federal Reserve rate hike now in the books, there is intense market speculation as to when the Fed might strike again. A rate hike in late January is not seen as likely, coming so soon after the December move. Many experts are forecasting another hike in March, contingent on a strong US economy. The Fed has hinted that it could raise rates up to four times in 2016, but experts like Chase Chief Economist Anthony Chan don’t think this will be the case.  A rate hike in late January is not seen as likely, coming so soon after the December move. A move by the Fed in March is more likely, but is of course contingent on a strong US economy. Although the economy is in good shape, one major area of concern is the inflation picture. Inflation levels have not kept up with other economic indicators and remain at low levels. The minutes of the December meeting indicated that some Fed members strongly considered voting against a rate hike due to weak inflation. Another concern is a lack of wage growth, despite a robust labor market. This was underscored by the last Average Hourly Earnings report, which came in at a flat 0.0% in December. The Fed will be keeping a close eye on inflation and wage growth data before reaching a decision to raise rates for a second time.

XAU/USD Fundamentals

Thursday (Jan. 14)

• 8:30 US Unemployment Claims. Estimate 275K. Actual 281K
• 8:30 US FOMC James Bullard Speaks
• 8:30 US Import Prices. Estimate -1.4%. Actual -1.2%
• 10:30 US Natural Gas Storage. Estimate -152B
• 13:01 US 30-year Bond Auction

Upcoming Key Events

Friday (Jan. 15)

• 8:30 US Core Retail Sales. Estimate 0.2%
• 8:30 US PPI. Estimate -0.2%
• 8:30 US Retail Sales. Estimate -0.1%
• 10:00 UoM Consumer Sentiment. Actual 92.7 points

*All release times are EST

*Key events are in bold

XAU/USD for Thursday, January 14, 2016

XAU/USD January 14 at 12:30 GMT

Open: 1094.90 Low: 1080.09 High: 1095.19 Close: 1080.80

XAU/USD Technical

• XAU/USD was flat in the Asian session. The pair has posted losses in the European and North American sessions.
• There is resistance at 1098
• 1080 is under strong pressure in support
• Current range: 1080 to 1098

Further levels in both directions:

• Below: 1080, 1043 and 1024
• Above: 1098, 1134, 1151 and 1175

OANDA’s Open Positions Ratio

XAU/USD ratio continues to show movement towards long positions, reflective of gold losing ground, which has led to the covering of short positions. Long positions retain a solid majority (71%), indicative of strong trader bias towards gold prices reversing directions and moving higher.

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.