Gold Flat in Holiday Trade

Gold prices are subdued on Monday, as the metal trades at $1089.14 an ounce in the North American session. There are no scheduled economic releases, as the US markets are closed for the Martin Luther King holiday.

US releases wrapped up the week on a mixed note. Core Retail Sales and Retail Sales both posted declines of 0.1%, pointing to weakness in consumer spending, a key driver of economic growth. At the same time, consumer confidence remains at high levels, as the UoM Consumer Sentiment jumped to 93.3 points, beating the estimate and posting a six-month high as well. Inflation levels, one of the sore points in a generally bright economic picture, continue to struggle. PPI, which measures inflation in the manufacturing sector, came in at -0.2%, matching expectations. Still, this marked the third decline in four months, and persistently weak inflation could delay the next Fed rate hike. There was more bad news from the manufacturing front, another trouble spot in the economy. The Empire State Manufacturing Index plunged to -19.4 points, compared to an estimate of -4.1 points.

The Federal Reserve raised interest rates in December for the first time in nine years, and hinted that this move was the first of a series in 2016. Not surprisingly, this has led to intense market speculation as to the timing of another rate hike. A rate hike in late January is not considered likely, coming so soon after the December move. A hike by the Fed in March is more probable, 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 the December 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

Monday (Jan. 18)

• There are no scheduled US releases

*All release times are EST

*Key events are in bold

XAU/USD for Monday, January 18, 2016

XAU/USD January 18 at 11:15 GMT

Open: 1090.37 Low: 1087.52 High: 1093.38 Close: 1090.37

XAU/USD Technical

• XAU/USD has shown marginal movement throughout the day.
• There is resistance at 1098
• 1080 is providing 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

In the XAU/USD ratio, long positions retain a solid majority (71%), indicative of strong trader bias towards gold prices 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.