Gold prices have posted sharp gains on Thursday, as the base metal trades at a spot price of $1271.45 per ounce in the North American session. Gold initially dropped after the ECB announced new easing measures, but recovered and posted gains after ECB head Mario Draghi stated that the ECB was unlikely to further lower rates. In the US, it was a quiet day on the release front. Unemployment Claims impressed, dropping to 259 thousand, well below the estimate.
It has been a volatile day for gold. The ECB surprised the markets with tough monetary medicine, cutting the benchmark rate to a flat 0.0% and expanding its bond-purchase program to EUR 80 billion/mth. This led to sharp losses by the euro and gold, but both assets reversed directions and posted sharp gains after Mario Draghi stated in a press conference that the ECB had no plans to further reduce the benchmark rate. Gold prices have jumped about 1.4 percent on the day.
A strong US Nonfarm Payrolls is often bullish for the US dollar, but an excellent January report failed to buoy the greenback against its major rivals late last week. The indicator impressed with a reading of 242 thousand, much higher than the estimate of 195 thousand. This was much stronger than the previous (revised) reading of 171 thousand. The US economy has added an average of 225,000 jobs per month since December, an impressive number considering that the economy has softened in the early part of 2016. Why then, did a stellar NFP release not impress the markets? The reason was that wage growth, which has consistently lagged behind other employment indicators, surprised the markets with a decline of 0.1% in January, the first drop in wages since December 2014. This indicator is closely linked to inflation, since an increase in wages means workers have more money to spend. The indicator’s decline means that that Federal Reserve’s inflation target of about 2.0% remains far off, so the Fed, which is keeping a close eye on the weak inflation picture, is unlikely to press the rate trigger at its policy meeting later this month.
Thursday (March 10)
- 8:30 US Unemployment Claims. Estimate 272K. Actual 259K
- 10:30 US Natural Gas Storage. Estimate -51B. Actual -57B
- 13:01 US 30-year Bond Auction
- 14:00 US Federal Budget Balance. Estimate -198.3B
*Key releases are highlighted in bold
*All release times are EST
XAU/USD for Thursday, March 10, 2016
XAU/USD March 10 at 13:30 EST
Open: 1253.55 Low: 1236.93 High: 1273.28 Close: 1271.45
- XAU/USD showed marginal movement in the Asian session. The pair initially posted sharp losses in the European session but then recovered. The pair continues to post strong gains in North American trade
- 1255 has switched to support following strong gains by the pair
- There is resistance at 1279
- Current range: 1255 to 1279
Further levels in both directions:
- Below: 1255, 1232, 1205 and 1191
- Above: 1279, 1303 and 1327
OANDA’s Open Positions Ratio
XAU/USD ratio remains almost unchanged this week, as long positions currently have a slight majority (54%). This is indicative of trader bias towards gold continuing to head to higher levels.