Gold Slips Close to $1200, Markets Eye US Consumer Confidence

Gold has posted considerable losses on Monday, as the metal trades at $1209.73 an ounce in the North American session. On the release front, it’s a slow start to the week, with only one event on the schedule. US Flash Manufacturing PMI slipped to 51.0, below expectations. On Tuesday, the US releases CB Consumer Confidence, with the markets expecting a slight drop to 97.4 points.

Gold prices remain strong, and have surged some 14 percent in the first two months of 2016. Market turmoil across the globe has put a worried frown on the faces of investors, many who have responded by fleeing risk and snapping up safe-haven assets like gold. The collapse of oil prices and the China slowdown have hurt the economies of developed countries, which are struggling with low inflation and weak global demand for oil and other exports. This economic turbulence which has characterized 2016 has been a boon for gold, and with these economic conditions likely to continue for some time, gold prices could continue to register strong gains.

The US wrapped up last week with positive news on the inflation front. CPI came in at 0.0%, and Core CPI improved to 0.3%, marking the strongest gain since April 2015. These readings are certainly not strong, but managed to beat their estimates, so speculation has increased that the Fed may reconsider a rate hike in March. However, such a move still seems unlikely, unless inflation picks up dramatically. Earlier in the week, the Federal Reserve sent out a cautious message in its minutes, which reiterated the central bank’s concern that turmoil in global markets could have negative repercussions for the US economy. Policymakers sent out a broad hint that a rate hike is unlikely in March, as they discussed “altering their earlier views of the appropriate path for the target range for the federal funds rate”. This could have a negative impact on the US dollar, as investors may look elsewhere to park their funds if US rates are not moving higher anytime soon. Federal Reserve chair Janet Yellen said last week that the Fed still planned to raise rates later in 2016, but FOMC member James Bullard argued that there was room to delay any rate moves, given global financial turmoil and weak US inflation. Many experts are skeptical that the Fed will make any more moves before next year, but central banks have a way of surprising the markets, so traders will have to keep a careful eye on the US central bank.

XAU/USD Fundamentals

Monday (Feb. 22)

• 9:45 US Flash Manufacturing PMI. Estimate 52.3 points. Actual 51.0 points

Upcoming Key Events

Tuesday (Feb. 23)

• 10:00 US CB Consumer Confidence. Estimate 97.4 points

*Key releases are highlighted in bold

*All release times are EST

*Key events are in bold

XAU/USD for Monday, February 22, 2016

XAU/USD February 22 at 11:40 EST

Open: 1225.36 Low: 1201.26 High: 1226.26 Close: 1209.73

XAU/USD Technical

• XAU/USD posted losses in the Asian session. The pair continued to drop in the European session, but then reversed directions. The pair is steady in North American trade.
• 1205 was tested earlier in support and is a weak line.
• 1232 has strengthened in resistance as the pair trades at lower levels
• Current range: 1205 to 1232

Further levels in both directions:

• Below: 1205, 1191, 1175 and 1151
• Above: 1232, 1255 and 1279

OANDA’s Open Positions Ratio

XAU/USD ratio has shown movement towards short positions. However, long positions still retain a strong majority (59%). This is indicative of trader bias towards gold reversing directions and 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.