Gold Ticks Higher, Federal Reserve Decision Looms

Gold has ticked higher in the Wednesday session. In North American trade, the spot price for an ounce of gold is $1246.42, up 0.16% on the day. On the release front, inflation numbers were a mix. CPI improved to 0.4%, matching the forecast. However, Core CPI, which excludes volatile items such as food and energy prices, edged lower to 0.1%, missing the estimate of 0.2%. Later in the day, the Federal Reserve is expected to raise rates to a range between 1.25% to 1.50%. On Thursday, the US releases retail sales reports and unemployment claims.

The Federal Reserve is in the spotlight, as policymakers meet for a monthly policy meeting later on Wednesday. Traders should be prepared for a possible drop in gold prices if rates move higher, as gold moves inversely to interest rate movements. The Fed is pleased with the strength of the US economy, but remains puzzled why strong growth and a red-hot labor market has not led to higher inflation. The labor market continues to operate at full capacity and various sectors in the economy are reporting a lack of workers. Still, this has not translated into stronger wage growth, despite predictions from Janet Yellen and other Fed policymakers that a lack of workers is bound to push up wages. On Friday, Average Hourly Earnings, which measures wage growth, came in at 0.2%, shy of the estimate of 0.3%. Whether inflation moves higher or remains depressed could have a significant effect on monetary policy – if wage growth and inflation shows improvement in 2018, the Fed could raise interest rates up to three times in 2018. After Wednesday’s rate announcement, the markets will be looking ahead to the January policy meeting, with the odds of a quarter-point hike standing at 86 percent.

 

XAU/USD Fundamentals

Wednesday (December 13)

  • 8:30 US CPI. Estimate 0.4%. Actual 0.4%
  • 8:30 US Core CPI. Estimate 0.2%. Actual 0.1%
  • 14:00 US FOMC Economic Projections
  • 14:00 US FOMC Statement
  • 14:00 US Federal Funds Rate. Estimate <1.50%
  • 14:00 US FOMC Press Conference

Thursday (December 14)

  • 8:30 US Core Retail  Sales. Estimate 0.6%
  • 8:30 US Retail  Sales. Estimate 0.3%
  • 8:30 US Unemployment Claims. Estimate 237K

*All release times are GMT

*Key events are in bold

 

XAU/USD for Wednesday, December 13, 2017

XAU/USD December 13 at 12:40 EST

Open: 1244.50 High: 1248.66 Low: 1240.30 Close: 1246.42

 

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1188 1213 1240 1260 1285 1307
  • XAU/USD was flat in the Asian session. The pair posted slight losses in the European session but has reversed directions and gained ground in the North American session
  • 1240 is providing support
  • 1260 is the next resistance line
  • Current range: 1240 to 1260

Further levels in both directions:

  • Below: 1240, 1213 and 1188
  • Above: 1260, 1285, 1307 and 1337

OANDA’s Open Positions Ratio

XAU/USD ratio is unchanged this week. Currently, long positions have a majority (74%), indicative of trader bias towards XAU/USD reversing directions and moving to higher ground.

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.