Gold Jumpy Ahead of Brexit Outcome, US Jobless Claims Dip

Gold has moved in both directions on Thursday, but has shown little net movement over the day. The metal is trading slightly above the $1260 level in the North American session.  On the release front, US numbers were a mix. US unemployment claims slipped to 259 thousand, below expectations. However, New Homes Sales dropped to 551 thousand, well short of the forecast. Today’s highlight is the Brexit referendum vote in the UK.

Will the Remain camp pull out a win in the Brexit referendum? After a bitter and hard-fought campaign, millions of Britons are voting on whether the country remains in the EU or exits from the bloc. Most polls show a neck-and-neck race between the Remain and Leave camps, so undecided voters will likely swing the vote and determine the final outcome. However, there is clearly a discrepancy between the polls and the market mood, as market sentiment continues to lean towards a victory by the Remain camp. This sentiment has boosted the pound, which briefly broke above 1.49 on Thursday and is trading at its highest level in 2016. The Remain camp has warned that a vote to leave the EU would damage the UK economy, while the “Leave” vote has tapped into voter dissatisfaction with Brussels, particularly concerning immigration and over-regulation by the EU. The economic stakes are massive, as the UK economy of GBP 2.9 trillion is the fifth largest in the world and number two in Europe, after Germany. A vote to leave the comfort zone of the EU would be a journey into the unknown, with unpredictable economic and political consequences for both the UK and the European Union. If the Remain camp does reign victorious, gold prices could drop, as the market appetite for risk will increase, which could come at the expense of safe-haven gold.

Federal Reserve chair Janet Yellen sounded cautious in her testimony about the US economy when she appeared before Congress this week. As expected, Yellen did not provide any clues about a future rate hike. She acknowledged that the US economy could face some adversity, saying that “[c]onsiderable uncertainty about the economic outlook remains”. Yellen said that she’s “hopeful that we will see a pickup in growth”, but skeptics might respond that the markets want to see action from the Fed and not just hope. The Fed has clearly been out of sync with the markets, as underscored by the Fed’s statements back in December that it might raise rates in 2016 up to four times. Meanwhile, here we are in June, and there’s no clear indication that the Fed will raise rates at all this year. In her testimony, Yellen said she does not expect the US economy to enter a recession, but if such a scenario did occur, the US would not follow Japan and Europe and adopt negative interest rates. On a more positive note, Yellen said that weak oil prices, low interest rates and stronger wage growth should support consumer spending.

XAU/USD Fundamentals

Thursday (June 23)

• 8:30 US Unemployment Claims. Estimate 271K. Actual 259K
• 9:45 US Flash Manufacturing PMI. Estimate 50.5. Actual 51.4
• 10:00 US New Home Sales. Estimate 561K. Actual 551K
• 10:00 US CB Leading Index. Estimate 0.2%. Actual -0.2%
• 10:30 US Natural Gas Storage. Estimate 59B. Actual 62B

Upcoming Key Events

Friday (June 24)

• 8:30 US Core Durable Goods Orders. Estimate 0.1%

*Key releases are highlighted in bold

*All release times are EDT

XAU/USD for Thursday, June 23, 2016

XAU/USD June 23 at 12:20 EDT

Open: 1262.53 Low: 1257.50 High: 1271.86 Close: 1264.42

XAU/USD Technical

• XAU/USD was flat in the Asian session and has been choppy in the European and North American sessions
• 1255 is providing support
• There is resistance at 1279
• Current range: 1255 to 1279

Further levels in both directions:

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

OANDA’s Open Positions Ratio

XAU/USD ratio has shown gains in long positions on Thursday, continuing the trend seen on Wednesday. Long positions have a majority (60%), indicative of trader bias towards XAU/USD breaking out 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.