Gold is showing limited movement on Wednesday, continuing the trend seen in the Tuesday session. XAU/USD is trading at $1283.95 in the North American session. On the release front, today’s highlight is the FOMC rate statement, with the markets expecting the Federal Reserve to maintain the current benchmark rate of 0.25%. Will we see some movement from gold after the Fed announcement? There was positive news out of the US earlier in the day. PPI came in at 0.4%, beating the estimate of 0.3%. As well, the Empire State Manufacturing Index was unexpectedly strong, with a reading of 6.0 points. US Crude Inventories continued to decline, with a reading of -0.9 million.
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 the timing of another rate hike.
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, removed any expectations for a June rate hike. As well, a dismal Nonfarm Payrolls report at the beginning of the month raised concerns about the US labor market and sent gold prices sharply higher. The Brexit referendum on June 23, in which the UK will vote on remaining in the European Union, has helped boost gold, as the uncertainty of the outcome has spooked investors who have dumped risky assets and snapped up safe-haven assets such as gold. There is continuing uncertainty over the Brexit referendum, as the “Leave” camp has gained strength in recent polls. The referendum has ramifications for the global economy, and key figures are weighing in on the repercussions if the UK votes to exit the EU. British Prime Minister David Cameron, Germany chancellor Angela Merkel and International Monetary Fund managing director Christine Lagarde have warned that a British departure could hurt the global economy. Federal Reserve Chair Janet Yellen has said that a vote to leave the EU could delay a rate hike in the US.
*Key releases are highlighted in bold
*All release times are EDT
XAU/USD for Wednesday, June 15, 2016
XAU/USD June 15 at 12:30 EDT
Open: 1284.43 Low: 1278.84 High: 1287.10 Close: 1283.95
- XAU/USD has shown limited movement in the Wednesday session
- 1279 was tested earlier in support and is under pressure
- 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 showing little movement on Wednesday, consistent with the lack of movement from XAU/USD. Currently, long positions maintain a majority (56%), indicative of trader bias towards XAU/USD breaking out and moving to higher levels.
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