XAU/USD – Gold Unchanged Ahead of BoJ, Fed Rate Announcements

Gold continues to have a quiet week and is unchanged on Tuesday. The metal is trading at a spot price of $1314.60 per ounce in the North American session. On the release front, there were only two releases on the schedule. Housing Starts and Building Permits both came in at 1.14 million, short of expectations. Later on Tuesday, the Bank of Japan will set interest rates and release a monetary policy statement, and the Federal Reserve will follow suit on Wednesday.

Gold prices, which are sensitive to interest rate moves, could show some volatility as the markets anxiously await announcements from the BoJ and the Federal Reserve. The BoJ embarked on an aggressive quantitative and qualitative easing scheme back in April 2013, with high hopes of kick-starting the economy and raising inflation levels. However, the results have been very disappointing. Inflation is closer to zero than the bank’s target of 2% and economic growth has sputtered. What can we expect from the BoJ this time around? Market players aren’t sure, as the bank appears divided on what action to take. The most likely scenarios are further negative interest rates or an expansion of the QE program. The BoJ could also opt to refrain from any moves for time being and use forward guidance to signal additional stimulus.

All eyes will be on the Federal Reserve on Wednesday, as the bank will set interest rates and release a policy statement. Janet Yellen delivered an upbeat speech back in August, and the predictable result was increased speculation about a rate hike as early as September. However, recent economic numbers have been mixed, so the Fed is widely expected to remain on the sidelines at the Wednesday meeting and revisit monetary policy in December. The markets have priced in a September hike at just 12 percent. Still, the Fed policy statement will be closely monitored by the markets, which will be looking for hints regarding a December move. If Janet Yellen delivers a dovish message, the market’s mood could sour and gold could move to higher ground. Recent comments from FOMC members, which have been almost contradictory at times, have left the markets confused and reinforced the perception that the Fed remains divided regarding its near-future monetary policy. With the markets expecting a rate hike in the near future, greater clarity from the Fed about its monetary policy plans could contribute to market stability and bolster the US dollar.

XAU/USD Fundamentals

Tuesday (September 20)

  • 8:30 US Building Permits. Estimate 1.17M. Actual 1.14M
  • 8:30 US Housing Starts. Estimate 1.19M. Actual 1.14M

Wednesday (September 21)

  • 14:00 FOMC Economic Projections
  • 14:00 FOMC Federal Funds Rate. Estimate <0.50%
  • 14:30 FOMC Press Conference

*Key releases are highlighted in bold

*All release times are EDT

XAU/USD for Tuesday, September 20, 2016

XAU/USD September 19 at 13:40 EDT

Open: 1313.95 High: 1317.98 Low: 1312.04 Close: 1314.56

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1245 1279 1307 1331 1361 1388
  • XAU/USD has shown limited movement on Tuesday, continuing the pattern seen in the Monday session
  • 1307 continues to provide weak support
  • There is resistance at 1331
  • Current range: 1307 to 1331

Further levels in both directions:

  • Below: 1307, 1279 and 1245
  • Above: 1331, 1361, 1388 and 1416

OANDA’s Open Positions Ratio

XAU/USD ratio is almost unchanged in the Tuesday session. Currently, long positions have a substantial majority (76%), 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

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.