Gold Shrugs as CPI Beats Estimate, Unemployment Claims Dip

Gold has ticked higher in the Thursday session. In North American trade, the spot price for an ounce of gold is $1325.07, up 0.13%. On the release front, CPI and Core CPI both improved in August. CPI gained 0.4%, edging above the forecast of 0.3%. Core CPI gained 0.2%, matching the forecast. There was more good news from the labor market, as unemployment claims fell to 284 thousand, well below the forecast of 303 thousand.

Gold prices are linked to interest rate moves, so gold investors are keenly following the Federal Reserve and looking for hints regarding a rate policy. What can we expect from the Federal Reserve in the fourth quarter? Earlier in 2017, the Federal Reserve was full of optimism that a strong US economy would warrant three rate hikes during in 2017. Fast forward to September – the economy has generally performed well, but the US continues to grapple with weak inflation levels. A strong labor market has not helped push inflation higher, as wage growth remains soft. Fed policymakers have retreated from their earlier optimistic forecasts, and have been counseling caution and patience regarding rate increases. As for a December hike, the odds have been below 50% for months. Currently, the odds are pegged at 46%, which is an improvement from last week. However, the positive August CPI data could be a sign that at long last, inflation is moving in the right direction. If the markets feel this is the case, the odds of a December hike should increase.

Gold has posted two straight winning weeks, but that streak could be over, as the metal is down about 1 percent this week. Much of the loss can be attributed to the easing of tensions in the Korean peninsula. As a safe-haven asset, gold had moved higher in recent weeks, as tensions increased over North Korea’s nuclear program. North Korea fired missiles over Japan and tested a nuclear device, drawing sharp reactions from the US, Japan and South Korea. However, a lull in the crisis has seen investors return to risk assets, triggering lower gold prices. Still, North Korea remains a geopolitical hot spot, and investors could flock back to gold if the war of words between US President Trump and North Korean President Kim Jong-un escalates and Kim decides to shake things up in the region with a missile launch or nuclear test.

XAU/USD Fundamentals

Thursday (September 14)

• 8:30 US CPI. Estimate 0.3%. Actual 0.4%
• 8:30 US Core CPI. Estimate 0.2%. Actual 0.2%
• 8:30 US Unemployment Claims. Estimate 303K. Actual 284K
• 10:30 US Natural Gas Storage. Estimate 80B. Actual 91B

Friday (September 15)

• 8:30 US Core Retail Sales. Estimate 0.5%
• 8:30 US Retail Sales. Estimate 0.1%
• 8:30 US Empire State Manufacturing Index. Estimate 18.2
• 10:00 US Preliminary UoM Consumer Sentiment. Estimate 95.1

*All release times are GMT

*Key events are in bold

XAU/USD for Thursday, September 14, 2017

XAU/USD September 14 at 12:40 EST

Open: 1323.26 High: 1327.86 Low: 1315.68 Close: 1325.07

XAU/USD Technical

• XAU/USD showed little movement in the Asian and European sessions. The pair has posted small gains in North American trade
• 1307 is providing support
• 1337 is the next resistance line
• Current range: 1307 to 1337

Further levels in both directions:

• Below: 1307, 1285 and 1260
• Above: 1337, 1367, 1392 and 1416

OANDA’s Open Positions Ratio

XAU/USD is showing slight movement towards short positions. Currently, long and short positions are evenly split, indicative of a lack of trader bias as to what direction XAU/USD will take next. 

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