Gold Under Pressure as Markets Eye FOMC Minutes

Gold has edged lower on Wednesday, trading at a spot price of $1272.25 an ounce in the North American session. On the release front, Crude Oil Inventories posted a gain of 1.3 million, much higher than expectations. Later in the day, the Federal Reserve will release the minutes of its April policy meeting. On Thursday the US will release Unemployment Claims and the Philly Fed Manufacturing Index.

Crude Oil Inventories surprised the markets on Wednesday, posting a gain of 1.3 million. The markets had expected a sharp decline of 3.2 million. US crude shrugged off the release, as the commodity continues to trade above the $48 level. Crude Oil Inventories, released weekly, have posted declines only twice since February, as US crude stockpiles remain at high levels. Oil prices have nonetheless remained high, in large part a result of production problems such as the massive wildfire in Alberta earlier this month.

The highly-anticipated Fed minutes will be released later on Wednesday. Will the minutes provide any insight about a June rate hike? The Fed has sent out the message that a June hike is on the table, but the markets remain skeptical, especially after the weak Nonfarm Payrolls report earlier this month. With the economy showing mixed employment numbers and inflation stuck at low levels, a June hike would be nothing less than a shock, a reason in itself for the Fed to remain on the sidelines. The Fed insists that June will be a “live meeting”, meaning that it will carefully weigh the possibility of a rate hike. The markets don’t seem to be buying into this message, clearly expecting rates to remain at the current level of 0.25%, with the implied probability of a hike down to just 4%. Gold prices are highly sensitive to moves in interest rates, as higher rates raise the opportunity cost of holding non-yielding assets such as gold. Therefore, any hints of a June hike could send gold prices downwards. Traders should be prepared for possible volatility from gold around the time of the publication of the Fed minutes.

XAU/USD Fundamentals

Wednesday (May 18)

  • 10:30 US Crude Oil Inventories. Estimate -3.1M. Actual 1.3M
  • 14:00 US FOMC Meeting Minutes

Upcoming Key Events

Thursday (May 19)

  • 8:30 US Philly Fed Manufacturing Index. Estimate 3.2
  • 8:30 US Unemployment Claims. Estimate 276K

*Key releases are highlighted in bold

*All release times are EDT

XAU/USD for Wednesday, May 18, 2016

XAU/USD May 18 at 12:10 EDT

Open: 1279.46 Low: 1266.58 High: 1280.44 Close: 1272.25

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1207 1232 1255 1279 1303 1324
  • XAU/USD posted losses in the Asian session. The pair has been marked by choppy trading in the European and North American sessions
  • 1279 is a weak resistance line
  • 1255 is providing support
  • Current range: 1255 to 1279

Further levels in both directions:

  • Below: 1255, 1232 and 1207
  • Above: 1279, 1303, 1324 and 1345

OANDA’s Open Positions Ratio

XAU/USD ratio is showing little movement on Wednesday. Long positions have a strong majority (61%), indicative of trader bias towards XAU/USD 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.

Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.