Gold Steady, Investors Await Powell Testimony to Congress

Gold has stated the week with slight gains. In Monday’s North American session, the spot price for an ounce of gold is $1331.69, up 0.16% on the day. On the release front, New Home Sales dropped to 593 thousand, well off the estimate of 655 thousand. This marked the smallest gain since August. Traders should be prepared for a busier Tuesday. The US releases durable goods and consumer confidence reports. As well, Federal Chair Jerome Powell will testify before the House Financial Services Committee.

Gold continues to show volatility. The base metal lost 1.5% last week, after climbing 2.2% a week earlier. Concerns that strong US numbers could stoke inflation and more rate hikes sparked the recent turbulence in global stock markets. This has triggered volatility in gold, as gold prices are sensitive to moves (or expected moves) in interest rates. The Fed is currently projecting three rate hikes this year, but if inflation continues to move upwards, the Fed could press the rate trigger four, or even five times in 2018. If the Fed does revise its rate hike projection upwards, gold prices would likely move downwards.

It hasn’t been a smooth ride for Jerome Powell, who took over as chair of the Federal Reserve from Janet Yellen earlier this month. Powell received a rude welcome from the markets just after moving into his new office, as the global stock market correction erased some $4 trillion in valuations. The volatility forced Powell to make a public statement, reassuring the markets that the Fed was  closely monitoring the situation. Powell will be on center stage this week, when he makes separate appearances before the House of Representatives and the Senate. After the recent stock markets volatility, Powell may opt to play it safe and keep away from any splashy headlines, which could lead to more fluctuation in the markets. Powell could choose to focus on the strong US economy and the Fed trimming its balance sheet, and steer away from a discussion of accelerating rate policy in order to head off higher inflation.

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XAU/USD Fundamentals

Monday (February 26)

  • 10:00 US New Home Sales. Estimate 655K. Actual 593K
  • 15:15 US FOMC Member Randal Quarles Speaks

Tuesday (February 27)

  • 8:30 US Fed Chair Jerome Powell Testifies
  • 8:30 US Core Durable Goods Orders. Estimate 0.4%
  • 8:30 US Durable Goods Orders. Estimate -2.4%
  • 10:00 US CB Consumer Confidence. Estimate 126.2

*All release times are GMT

*Key events are in bold

XAU/USD for Monday, February 26, 2018

XAU/USD February 26 at 13:20 EST

Open: 1329.62 High: 1341.07 Low: 1326.73 Close: 1331.69

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1260 1285 1307 1337 1375 1416
  • XAU/USD posted strong gains in the Asian session. The pair reversed directions in the European session, recording slight losses. The pair has moved lower in North American trade
  • 1307 is providing support
  • 1337 was tested in resistance earlier
  • 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 slim majority (52%). This is indicative of a slight 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.

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.