Gold has edged higher on Tuesday, as the metal trades at a spot price of $1320.33 per ounce in the North American session. On the release front, US key indicators looked sharp, as CB Consumer Confidence and New Home Sales both beat expectations. On Wednesday, the US releases durable goods orders and the Federal Reserve will issue a policy statement.
We could see some volatility from gold this week, as the Japanese and US central banks release statements later this week. However, the two banks are moving in opposite directions as far as monetary stance. The Federal Reserve is not expected to raise rates at the Wednesday meeting, but markets players will be playing close attention to the Fed policy statement, looking for clues regarding a rate hike later in the year. Still, there are some key factors which mitigate against a hike in the next few months. First, inflation remains stuck at low levels, well short of the Fed’s target of around 2 percent. Fed policymakers will be hesitant to raise rates if inflation is not projected to point upwards. Second, most of the recent data is from June, and does not fully take into account the Brexit vote on June 23. Fed members have expressed concern about the economic fallout from Brexit, and will want to review releases coming out in August and September in order to gauge the effects of Brexit.
The BoJ has been under strong pressure to adopt further easing steps, but does it have any monetary ammunition left? Interest rates are already down to zero, and the economy continues to struggle with deflation. Other options available to the bank include expanding quantity or quality easing. Enter Prime Minister Shinzo Abe, who is expected to announce new fiscal measures in order to kick-start the languishing economy. On Tuesday, a Nikkei report stated that the government would unveil a direct fiscal stimulus of about JPY 6 trillion yen over the next few years. However, the markets are looking for a much higher stimulus program, perhaps as high as JPY 20 trillion. If the BoJ does adopt further easing, gold prices could move higher at the expense of the Japanese currency.
Tuesday (July 27)
- 9:00 US S&P/CS Composite-20 HPI. Estimate 5.6%. Actual 5.2%
- 9:45 US Flash Services PMI. Estimate 51.2. Actual 50.9
- 9:59 US Richmond Manufacturing Index. Estimate -4. Actual +10
- 10:00 US CB Consumer Confidence. Estimate 95.6. Actual 97.3
- 10:00 US New Home Sales. Estimate 560K. Actual 560K
Upcoming Key Events
Wednesday (July 27)
- 8:30 US Core Durable Goods Orders. Estimate 0.3%
- 14:00 US FOMC Statement
- 14:00 US Federal Funds Rate. Estimate <0.50%
*Key releases are highlighted in bold
*All release times are EDT
XAU/USD for Tuesday, July 26, 2016
XAU/USD July 26 at 11:00 EDT
Open: 1316.10 High: 1331.05 Low: 1310.76 Close: 1320.49
- XAU/USD posted small losses in the Asian session. The pair was flat in the European session and has posted gains in North American trade.
- There is resistance at 1331
- 1307 is providing support
- Current range: 1307 to 1331
Further levels in both directions:
- Below: 1307, 1279 and 1255
- Above: 1331, 1361, 1388 and 1416
OANDA’s Open Positions Ratio
On Monday, XAU/USD ratio is showing little change on Tuesday, consistent with the lack of significant movement from XAU/USD. Long positions continue to command a strong majority (69%). This is indicative of trader bias towards XAU/USD continuing to move higher.