XAU/USD – Gold Listless as Fed Divided Over Rate Move

Gold has ticked lower on Thursday, as the metal trades at $1350.63 in the North American session. On the release front, the Philly Fed Manufacturing Index improved to 2.0 points, while Unemployment Claims dipped to 262 thousand, as both indicators beat expectations.

Gold prices are sensitive to interest rate movements, so any hint in the Federal Reserve minutes with regard to a rate hike could have sent gold prices lower. In the end, however, the minutes proved to be a non-event, as Fed officials did not provide any outlook on a rate move. The minutes indicated that FOMC members are divided on the timing of a rate hike – some members want to raise rates soon, as the US labor market approaches full employment, while others expressed concern about making a move with inflation levels well below the target of 2%. This debate needs to be resolved one way or another, as the Fed must make a rate decision next month. Clearly, policymakers will be swayed by economic data, particularly employment and inflation numbers. The news remains bleak on the latter front, as underscored by July’s consumer inflation reports. CPI posted a weak reading of 0.0%, its worst showing in five months. Core CPI dropped to 0.1%, shy of the estimate of 0.2%. Recent data is pointing in all directions, which explains why the Fed is divided over the timing of a rate hike. After a soft GDP report in late July, nonfarm payrolls was stellar. However, this was followed by weak retail sales and CPI numbers. As things stands now, a September hike is virtually off the table, while the Fed could go either way in December, with the odds of a rate hike currently pegged at 50/50.

XAU/USD Fundamentals

Thursday (August 18)

  • 8:30 US Philly Fed Manufacturing Index. Estimate 1.4. Actual 2.0
  • 8:30 US Unemployment Claims. Estimate 269K. Actual 262K
  • 10:00 US CB Leading Index. Estimate 0.3%. Actual 0.4%
  • 10:05 FOMC Member William Dudley Speaks
  • 10:30 US Natural Gas Storage. Estimate 26B. Actual 22B

*Key releases are highlighted in bold

*All release times are EDT

XAU/USD for Thursday, August 18, 2016

XAU/USD August 18 at 13:20 EDT

Open: 1347.74 High: 1347.94 Low: 1340.61 Close: 1345.59

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1279 1307 1331 1361 1388 1416
  • XAU/USD has shown limited movement in the Asian and European sessions. The pair is flat in North American trade
  • There is resistance at 1361
  • 1331 is providing support
  • Current range: 1331 to 1361

Further levels in both directions:

  • Below: 1331, 1307 and 1279
  • Above: 1361, 1388, 1416 and 1447

OANDA’s Open Positions Ratio

XAU/USD ratio is showing movement towards short positions. Currently, long positions command a strong majority (60%), indicative of trader bias towards XAU/USD breaking out and moving upwards. 

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.

Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.