Gold has posted sharp losses on Tuesday. The base metal is trading at a spot price of $1231.16 an ounce in the North American session. On the release front, US New Home Sales jumped to 619 thousand, well above the estimate. Richmond Manufacturing Sales declined 1 point, missing expectations.
Gold has endured a very rough month of May, losing some 4.8% of its value and wiping out the gains recorded in April. The downward trend continued on Tuesday, as the metal has declined 1.4% on Tuesday. An excellent US housing report earlier in the day bolstered the greenback at the expense of gold. New Home Sales surged in April, with an excellent reading of 619 thousand, compared to 511 thousand a month earlier. This figure crushed the estimate of 521 thousand and marked an 8-year high. Last week, Existing Home Sales posted a second straight gain, improving to 5.45 million. This was above the forecast of 5.40 million. Gold is also under pressure as demand has fallen off sharply in India and China. Meanwhile, there was disappointing news from a minor manufacturing indicator. The Richmond Manufacturing Index came in at -1 point, surprising the markets which had expected a strong gain of 9 points. This weak reading follows the Philly Fed Manufacturing Index, which continues to struggle. The indicator posted a decline of 1.8 points, well short of the estimate of a 3.2 point gain. We’ll get another look at key manufacturing data on Thursday, with the release of durable goods reports.
Will the Federal Reserve make a move in June? Last week’s Federal Reserve’s minutes were more hawkish than expected, and this resulted in strong volatility in the currency markets last week. It has also renewed market speculation about a June rate hike. The Fed is unlikely to make a move if key indicators don’t show improvement, particularly inflation indicators. On Monday, FOMC members James Bullard and John Williams voiced support for further rate hikes. Bullard said that the Fed planned to resume rate hikes if the US economy strengthened, while Williams reiterated that he expected the Fed to raise rates two or three times in 2016. However, there appears to be a gap between what Fed members are saying and market sentiment, as many analysts are projecting only one rate hike this year. The guessing game as to what the Fed has in mind is likely to continue into June, but it’s safe to say that another rate move will be data-dependent, so stronger US numbers will increase the likelihood of a quarter-point hike at the June policy meeting.
Tuesday (May 24)
- 10:00 US New Home Sales. Estimate 521K. Actual 619K
- 10:00 US Richmond Manufacturing Index. Estimate 9 points. Actual -1 points
*Key releases are highlighted in bold
*All release times are EDT
XAU/USD for Tuesday, May 24, 2016
XAU/USD May 24 at 12:05 EDT
Open: 1249.39 Low: 1230.29 High: 1252.135 Close: 1231.16
- XAU/USD has posted steady losses in the Tuesday session
- 1207 is providing support
- 1232 is fluid and could break in resistance in the North American session
- Current range: 1207 to 1232
Further levels in both directions:
- Below: 1207, 1191 and 1164
- Above: 1232, 1255, 1279 and 1303
OANDA’s Open Positions Ratio
XAU/USD ratio is almost unchanged on Tuesday. Long positions maintain a strong majority (65%), indicative of trader bias towards XAU/USD reversing directions and moving to higher levels.