Gold Starts Off Week With Strong Gains

Gold has started the trading week with gains, pushing above the $1300 level. In North American trade, the spot price for an ounce of gold is $1308.47, up 0.92%. There are no US economic releases on the schedule, but FOMC member William Dudley spoke earlier, and we’ll also hear from Charles Evans and Neel Kashkari. On Tuesday, the US releases CB Consumer Confidence and New Home Sales. Federal Reserve Chair Janet Yellen will speak at an event in Cleveland.

Federal Reserve policymakers have been divided over a rate hike in December, which would mark a third rate increase in 2017. With no clear message from the Fed, the markets really don’t know what to expect, and fed futures have priced in a December hike at 55%. On Monday, New York Fed President William Dudley made a strong case to raise rates. Dudley cited a soft US dollar and strong global growth as reasons why inflation would increase and also translate into stronger wage growth. Dudley said he expects inflation to reach the Fed’s target of 2% in the “medium term”, and predicted that the Fed would continue to gradually remove monetary accommodation. In last week’s rate statement, the Fed announced that it would reduce its $4.2 trillion balance sheet by $50 billion/mth, starting in October.

Germany held a national election on Sunday, and the markets are following the results with caution. Angela Merkel’s CDU won 33% of the vote in the German election, which means that Merkel will have to enter arduous negotiations with other parties in order to form a coalition government. The center-left SFD, which won 20% of the vote, has already said it will not join the CDU, so Merkel has her work cut out for her. The far-right AFD ran on a far-right, anti-immigrant platform, and the party’s surge in support has sent shock waves in Germany and across Europe. The AFD cannot be considered as a coalition partner, which leaves the Greens and the pro-business FDP party as the most likely configuration. However, the FDP has insisted on the powerful finance portfolio and will likely try to reduce German transfer payments to the European Union. If negotiations become deadlocked, gold prices could rise in response to nervous markets.

XAU/USD Fundamentals

Monday (September 25)

• 8:30 US FOMC Member William Dudley Speaks
• 12:40 US FOMC Member Charles Evans Speaks
• 18:30 US FOMC Member Neel Kashkari Speaks

Tuesday (September 26)

• 10:00 US CB Consumer Confidence. Estimate 119.6
• 10:00 US New Home Sales. Estimate 591K
• 12:45 Fed Chair Janet Yellen Speaks

*All release times are GMT

*Key events are in bold

XAU/USD for Monday, September 25, 2017

XAU/USD September 25 at 12:50 EST

Open: 1297.29 High: 1310.12 Low: 1289.10 Close: 1308.48

XAU/USD Technical

• XAU/USD edged lower in the Asian session. The pair was flat in the European session and has posted strong gains in North American trade
• 1307 has switched to a support role after gains by XAU/USD in the Monday session
• 1337 is the next resistance line
• Current range: 1307 to 1337

Further levels in both directions:

• Below: 1307, 1285, 1260 and 1240
• Above: 1337, 1367 and 1392

OANDA’s Open Positions Ratio

In the Monday, XAU/USD is showing long positions with a majority (54%). This is indicative of trader bias towards XAU/USD continuing to move to higher ground. 

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