Gold Edges Lower as US Posts Strong Manufacturing Numbers

Gold has posted slight losses in the Wednesday session. In North American trade, the spot price for an ounce of gold is $1336.32, down 0.18% on the day. On the release front,  manufacturing numbers looked sharp. Capacity Utilization improved to 77.9%, beating the estimate of 77.3%. This marked the highest level since July 2014.On Thursday, there are a host of key indicators out of the US, led by Building Permits and unemployment claims.

The Federal Reserve hasn’t been in the headlines since New Years’, but the lull won’t last much longer. The Fed will hold its next policy meeting on January 31. A rate hike is a virtual certainty, with CME Fed Watch pegging the odds of a quarter-point hike at 98.5%. Although this means that a rate hike has been priced in by the markets, the dollar could nevertheless gain ground after a hike, as a rate increase would signify an important vote of confidence in the economy by the Fed Reserve. If the US economy continues to expand at a clip of around 3 percent, there is a strong likelihood of another rate hike in the first half of 2018.

Gold often gains ground when investor risk appetite is weak, but that has not been the case early in 2018. Global stock markets are pointing higher and US economic numbers have been strong. This points to recent weakness in the US dollar as the catalyst for stronger gold prices. If major currencies such as the euro and Japanese yen continue to make inroads against the dollar, traders can expect the gold rally to continue.

 

XAU/USD Fundamentals

Wednesday (January 17)

  • 9:15 US Capacity Utilization Rate. Estimate 77.3%. Actual 77.9%
  • 9:15 US Industrial Production. Estimate 0.3%
  • 10:00 US NAHB Housing Market Index. Estimate 73
  • 14:00 US Beige Book
  • 16:00 US TIC Long-Term Purchases. Estimate 50.1B
  • 16:30 US FOMC Member Loretta Mester Speaks

Thursday (January 18)

  • 8:30 US Building Permits. Estimate 1.29M
  • 8:30 US Housing Starts. Estimate 1.28M
  • 8:30 US Philly Fed Manufacturing Index. Estimate 24.9
  • 8:30 US Unemployment Claims. Estimate 250K

*All release times are GMT

*Key events are in bold

 

XAU/USD for Wednesday, January 17, 2018

XAU/USD January 17 at 10:40 EST

Open: 1338.56 High: 1344.08 Low: 1333.05 Close: 1336.32

 

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1260 1285 1307 1337 1375 1416
  • In the Asian session, XAU/USD edged higher but then retracted. This pattern repeated in the European session. The pair is showing little movement in North American trade
  • 1307 is providing support
  • 1337 was tested earlier in resistance. It is under strong pressure
  • Current range: 1307 to 1337

Further levels in both directions:

  • Below: 1307, 1285, 1260 and 1240
  • Above: 1337, 1375 and 1416

OANDA’s Open Positions Ratio

XAU/USD ratio is almost unchanged in the Wednesday session. Currently, short positions have a majority (55%), indicative of trader bias towards XAU/USD continuing to move to lower 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.