Gold Jumps as Investors Waiting for Fed Rate Statement

Gold has posted strong gains in the Wednesday session. In North American trade, the spot price for an ounce of gold is $1324.61, up 1.02% on the day. On the release front, the current account deficit widened to $128 billion, above the estimate of $125 billion. In economic news, the US, the current account deficit widened to $128 billion, above the estimate of $125 billion. On the housing front, Existing Home Sales jumped to 5.54 million, easily beating the estimate of 5.41 million. All eyes are on the Federal Reserve, which is expected to raise the benchmark rate to a range of between 1.50% and 1.75%. On Thursday, the US releases unemployment claims.

Gold prices continue to show movement ahead of the Federal Reserve rate announcement later on Wednesday. Although a rate hike is bullish for the US dollar (and bearish for gold), uncertainty about the rate statement is weighing on the US dollar – is the Fed sticking to its projection of three rates this year, or will it hint at a fourth increase? The meeting will mark a host of firsts – the Fed is expected to raise rates for the first time in 2018, and Fed Chair Jerome Powell will preside as chair of the FOMC for the first time, followed by Powell’s first post-FMOC press conference. The Fed has sounded marginally more hawkish recently – will this trend continue in the rate statement? The Fed rate projection remains at three rates for 2018, but with the US economy continuing to perform well, this forecast could be revised upwards to four rates. If the rate statement is unexpectedly hawkish, gold could give up some of Wednesday’s gains.

After months of rough rhetoric between Britain and the EU, the two sides announced that there would be a transition period following the UK’s departure from the EU in March 2019. The transition deal will kick in at that time, lasting until December 2020. The deal covers the rights and status of EU citizens in the UK and British citizens in the EU, and allows the UK to pursue new trade agreements during that time. There are still some issues to iron out, such as the Northern Ireland border. The transition period is a major, positive development, in that it will enable Britain to enjoy the benefits of the common market, albeit without a seat at the table. The positive news could raise investor risk appetite and weigh on gold prices.

XAU/USD Fundamentals

Wednesday (March 21)

  • 8:30 US Current Account. Estimate -125B. Actual -128B
  • 10:00 US Existing Home Sales. Estimate 5.41M. Actual 5.54M
  • 10:30 US Crude Oil Inventories. Estimate +2.6M. Actual -2.6M
  • 14:00 US FOMC Economic Projections
  • 14:00 US FOMC Statement
  • 14:00 US Federal Funds Rate. Estimate <1.75%
  • 14:30 US FOMC Press Conference

Thursday (March 22)

  • 8:30 US Unemployment Claims. Estimate 225K

*All release times are GMT

*Key events are in bold

XAU/USD for Wednesday, March 21, 2018

XAU/USD March 21 at 12:50 EST

Open: 1311.21 High: 1326.73 Low: 1309.87 Close: 1324.61

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1260 1285 1307 1337 1375 1416
  • XAU/USD ticked higher in the Asian session. The pair posted gains in European trade and continues to head higher in the North American session
  • 1307 is providing weak 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 showing gains in short positions in the Wednesday session, consistent with the strong gains by XAU/USD on Wednesday. Currently, long positions have a majority (53%), indicative of trader bias towards XAU/USD continuing to move higher.

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

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.