Gold Shrugs as US Services PMI Beats Expectations

Gold has posted small gains in the Monday session. In North American trade, the spot price for an ounce of gold is $1335.14, up 0.15% on the day. On the release front, the ISM Non-Manufacturing PMI climbed to 59.9, above the forecast of 56.5 points. This points to strong expansion in the services sector and marked a 3-month high. On Tuesday, the US releases JOLTS Job Openings.

On Friday, US employment numbers were strong, propelling the dollar to broad gains, including against gold, which dropped 1.2%. Nonfarm payrolls jumped to 200 thousand, beating the estimate of 181 thousand. Wage growth remained steady at 0.3%, edging above the estimate of 0.2%. Will the strong numbers lead to additional interest rate hikes? Minneapolis Fed President Neel Kaskkari said on Friday that the Fed might need to be more aggressive if wages continued to move higher. The Fed is planning to raise rates three times in 2018, but some economists are forecasting four hikes.

The Janet Yellen era is over at the Federal Reserve. On the weekend, Jerome Powell took over as chair, replacing Yellen. On Friday, Yellen waxed optimistic about the economy, saying that strong growth, a red-hot labor market and increased wage growth would require the Fed to gradually raise interest rates. Powell is expected to continue to Yellen’s policies, so the markets are not expecting any dramatic shifts. However, the massive US tax cut will have a strong impact on the US economy, and the markets will be looking to the Fed for guidance. If the Fed sounds optimistic about the tax reform package, the US dollar could move higher.

XAU/USD Fundamentals

Monday (February 5)

• 9:45 US Final Non-Manufacturing PMI. Estimate 53.3. Actual 53.3
• 10:00 US ISM Non-Manufacturing PMI. Estimate 56.5. Actual 59.9
• Tentative – US Loan Officer Survey

Tuesday (February 6)

• 10:00 US JOLTS Jobs Openings. Estimate 5.95M

*All release times are GMT

*Key events are in bold

XAU/USD for Monday, February 5, 2018

XAU/USD February 5 at 12:40 EST

Open: 1333.08 High: 1338.66 Low: 1329.05 Close: 1335.14

XAU/USD Technical

• XAU/USD showed little movement in the Asian session and posted gains in European trade. In North American trade, the pair edged lower but has recovered
• 1307 is providing support
• 1337 was tested in resistance and is under pressure
• Current range: 1307 to 1337

Further levels in both directions:

• Below: 1307, 1285 and 1260
• Above: 1337, 1375, 1416 and 1433

OANDA’s Open Positions Ratio

In the Monday session, XAU/USD ratio is showing short positions with a majority (59%). This is indicative of trader bias towards XAU/USD reversing directions and moving lower.

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.