Gold Halts Slide, FOMC Minutes Next

Gold has posted slight gains in the Wednesday session, following two consecutive days of losses. In North American trade, spot gold is trading at $1273.64, up 0.18% on the day. On the release front, housing numbers were weaker than expected. Building Permits dipped to 1.22 million, shy of the forecast of 1.25 million. Housing Starts slowed to 1.16 million, missing the estimate of 1.22 million. Later in the day, the FOMC will release the minutes of its July policy meeting. On Thursday, there are two major events in the US – unemployment claims and the Philly Fed Manufacturing Index.

There was positive news from the consumer front, as Retail Sales and Core Retail Sales both beat their estimates, with gains of 0.6% and 0.5%, respectively. Consumer spending numbers are closely watched, as they are a key driver of economic growth. The strong gains in retail sales have helped raise investor risk appetite, which took a hit last week over the crisis in the Korean peninsula. This has boosted the stock markets, but hurt gold prices. Last week, tensions soared between the two enemies, sending gold about 2.4%, as investors dumped shares and snapped up the safe-haven metal. With the tension temperature dropping this week, risk appetite has returned, and gold prices have dropped 1.2% so far this week.

The Federal Reserve releases its July minutes later on Wednesday, and the markets will be listening closely. Although the minutes might not shed light on the likelihood of a rate hike before the end of the year, analysts will be looking for further details about the Fed’s balance sheet, which has ballooned to $4.2 trillion. At the June policy meeting, the Fed outlined plans to begin reducing the balance sheet, but shied away from providing any details regarding the size of the reductions or a start time for the plan. Analysts expect September will be the start date, and the Fed could start the process by slowing its asset purchases by a modest amount, such as $10 billion/mth. Once the reductions start, the US dollar stands to gain ground for two reasons. First, the move would mark a vote of confidence in the US economy. Second, a reduction of $60 billion is expected to have the same effect as a quarter-point rate hike, which would make the dollar a more attractive asset for investors. In turn, this could weigh on gold prices.

XAU/USD Fundamentals

Wednesday (August 16)

• 8:30 US Building Permits. Estimate 1.25M. Actual 1.22M
• 8:30 US Housing Starts. Estimate 1.22M. Actual 1.16M
• 10:30 US Crude Oil Inventories. Estimate -3.0M. Actual -8.9M
• 14:00 US FOMC Meeting Minutes

Thursday (August 17)

• 8:30 US Unemployment Claims. Estimate 240K
• 8:30 US Philly Fed Manufacturing Index. Estimate 18.3

*All release times are EDT

*Key events are in bold

XAU/USD for Wednesday, August 16, 2017

XAU/USD August 16 at 12:05 EST

Open: 1271.37 High: 1274.44 Low: 1267.73 Close: 1273.31

XAU/USD Technical

• XAU/USD edged higher in the Asian session. The pair posted small losses in the European session but has recovered in North American trade
• 1260 is providing support
• 1285 is the next resistance line
• Current range: 1260 to 1285

Further levels in both directions:

• Below: 1260, 1232, 1199 and 1170
• Above: 1285, 1307 and 1337

OANDA’s Open Positions Ratio

XAU/USD ratio is showing little movement in the Wednesday session. Currently, long positions have a majority (53%), indicative of a slight trade bias towards XAU/USD continuing to post gains.

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