Gold Unchanged as Markets Eye Fed Rate Statement

Gold is almost unchanged on Tuesday, following losses in the Monday session. XAU/USD is trading at $1282.43 in the North American session. On the release front, Core Retail Sales matched the forecast with a gain of 0.4%, while Retail Sales edged above the forecast, climbing 0.5%. On Wednesday, the Federal Reserve will release its rate statement, with the markets expecting no change to interest rate levels. The US will also release PPI, which measures inflation in the manufacturing sector.

Gold prices have climbed 5.4% in the month of June, erasing most of the losses sustained in May. Much of the gains have revolved around recent statements from Fed chair Janet Yellen and her colleagues, which have dampened expectations of a June rate hike. As well, a dismal Nonfarm Payrolls report at the beginning of June raised concerns about the US labor market and sent gold sharply higher. The Brexit referendum is also affecting the movement of gold, as the uncertainty of the outcome has spooked investors who have dumped risky assets and snapped up safe-haven assets such as gold.

The Federal Reserve will return to the spotlight on Wednesday, as the Fed concludes its policy meeting with a rate statement. The markets have written off a rate hike in June, while a July move remains unlikely, according to the CME Group. The chances of a June hike are just 1.9% compared to a 26.3% in May. The chances of a July hike is 17.9%, compared to 43.2% in May. The sharp drop in market sentiment for a rate hike can be attributed to the dismal US Nonfarm Payrolls report as well as some backpedaling by Fed over the past few weeks. Back in April, Fed chair Janet Yellen had renewed hopes of rate hike in the summer, when she said that she expected a rate hike in “the coming months”. Since then, Yellen has sounded more cautious, and in a recent speech she was careful to avoid a time frame regarding a rate hike. To be fair, the Fed has made a strong effort to communicate clearly with the markets, and has stated that the timing of a rate hike would be data-dependent. With the US economy posting some mixed numbers and inflation levels remaining at low levels, it should not come as a surprise that the Fed may stay on the sidelines until September or even later. Although it’s extremely unlikely that the Fed will make a move in June, the markets will be carefully monitoring the rate statement, looking for some clues regarding a July rate hike.

XAU/USD Fundamentals

Tuesday (June 14)

• 5:55 US NFIB Small Business Index. Estimate 93.8. Actual 93.8
• 8:30 US Core Retail Sales. Estimate 0.4%. Actual 0.4%
• 8:30 US Retail Sales. Estimate 0.4%. Actual 0.5%
• 8:30 US Import Prices. Estimate 0.8%. Actual 1.4%
• 10:00 US Business Inventories. Estimate 0.2%. Actual 0.1%

Upcoming Key Events

Wednesday (June 15)

• 8:30 US PPI. Estimate 0.3%
• 14:00 US FOMC Economic Projections
• 14:00 US FOMC Statement
• 14:00 US Federal Funds Rate. Estimate <0.50%
• 14:30 US FOMC Press Conference

*Key releases are highlighted in bold

*All release times are EDT

XAU/USD for Tuesday, June 14, 2016

XAU/USD June 14 at 12:30 EDT

Open: 1281.32 Low: 1281.28 High: 1282.70 Close: 1282.43

XAU/USD Technical

• XAU/USD was flat in the Asian session. The pair posted gains in the European session but retracted in North American trade
• 1279 is providing weak support
• There is resistance at 1307
• Current range: 1279 to 1307

Further levels in both directions:

• Below: 1279, 1255, 1232 and 1207
• Above: 1307, 1331 and 1361

OANDA’s Open Positions Ratio

XAU/USD ratio is unchanged on Tuesday, consistent with the lack of movement from XAU/USD. Currently, long positions maintain a slight  majority (53%), indicative of trader bias towards XAU/USD continuing to climb 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.