Gold Slides to 4-Week Low as Stock Markets Settles Down

Gold has posted losses in the Wednesday session. In North American trade, the spot price for an ounce of gold is $1318.19, down 0.47% on the day. On the release front, there are no major US events on the schedule.

It’s been a volatile week for stock markets across the world, and this has triggered strong movement in gold prices. A massive sell-off on Monday sent spooked investors looking for safe assets, boosting gold prices. A key factor in the stock market slide was strong employment numbers on Friday, as nonfarm payrolls and wage growth reports beat their estimates. Investors shied away from the stock markets, concerned that the sharp data could lead to higher inflation. This in turn would result in more rate hikes this year, making the dollar more attractive at the expense of gold and other currencies. However, US markets quickly recovered, posting gains on Tuesday and Wednesday. With risk appetite returning, gold has become less attractive, and is trading at its lowest level since January 11.

Jerome Powell was probably hoping for a quiet start at his new job as chair of the Federal Reserve, but the stock markets had other plans. Powell, who took over on Saturday, was greeted by the largest one-day drop ever on the Dow Jones on Monday, as US stock markets nosedived. Some analysts went as far as attributing some of the losses on the changing of the guard at the Fed, but this appears unlikely, given that Powell is expected to follow Janet Yellen’s policies. This sentiment was echoed by on Tuesday by St. Louis Federal Reserve President James Bullard, who said that he does not think that policy will change appreciably under Powell.

 

XAU/USD Fundamentals

Wednesday (February 7)

  • 8:30 US FOMC Member William Dudley Speaks
  • 10:30 US Crude Oil Inventories. Estimate 3.2M. Actual 1.9M
  • 13:01 US 10-year Bond Auction
  • 15:00 US Consumer Credit. Estimate 19.9B
  • 17:20 US FOMC Member John Williams Speaks

Thursday (February 8)

  • 8:30 US Unemployment Claims. Estimate 236K

*All release times are GMT

*Key events are in bold

XAU/USD for Wednesday, February 7, 2018

XAU/USD February 7 at 12:30 EST

Open: 1324.29 High: 1332.36 Low: 1317.82 Close: 1318.19

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1260 1285 1307 1337 1375 1416
  • XAU/USD posted gains in the Asian session but gave up these gains in European trade. The pair continues to lose ground 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, 1375, 1416 and 1433

OANDA’s Open Positions Ratio

XAU/USD ratio is unchanged in the Wednesday session. Currently, short positions have a majority (62%), indicative of trader bias towards XAU/USD continuing to move 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.

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.