Gold Calm at Start of Week, Services PMI Ahead

Gold has posted slight gains in the Monday session. In the North American session, the spot price for one ounce of gold is $1296.65, up 0.21% on the day. On the release front, it’s a quiet start to the week, with no major events on the schedule. US Factory Orders expected to decline 0.4%, after a strong gain of 1.6% in the previous release. On Tuesday, we’ll get a look at ISM Non-Manufacturing PMI and JOLTS Jobs Openings.

Are we heading towards a full-blown global trade war? There are some ominous signs that this could be the case, and what would be bad news for the markets could boost gold, which tends to move higher in times of crisis. On Thursday, the Trump administration made good on its threats and imposed stiff tariffs on the European Union, Mexico and Canada. The U.S had granted all three trading partners a temporary extension, but cited insufficient progress on trade talks as the reason for the tariffs.  This has triggered promises of retaliatory tariffs on US products, and matters heated up on the weekend at the G-7 meeting of finance ministers in Canada. U.S Treasury Secretary Steve Mnuchin faced sharp criticism from other finance ministers over the tariffs.

A rate hike in June from the Federal Reserve is virtually a given, with the CME Group forecasting a gain of 94%. At the same time, there is increasing talk that the Fed is moving closer to a neutral monetary policy. Recent statements by FOMC policymakers appear to support such a conclusion, which would mean that the Fed would let the economy ‘ride on its own steam’ without intervening by adjusting interest rates. The minutes of the May meeting noted that policymakers would consider allowing inflation to rise above the Fed’s 2 percent target for a temporary period, which means that the Fed would not rush to raise rates based on the inflation target. After June, the Fed is most likely to raise rates in September. Analysts are divided on whether a fourth rate hike will be needed. If the economy is in danger of overheating, policymakers would have to seriously consider another rate increase in December.

XAU/USD Fundamentals

Monday (June 4)

  • 10:00 US Factory Orders. Estimate -0.4%

Tuesday (June 5)

  • 10:00 US ISM Non-Manufacturing PMI. Estimate 57.9
  • 10:00 US JOLTS Job Openings. Estimate 6.49M

*All release times are DST

*Key events are in bold

XAU/USD for Monday, June 4, 2018

XAU/USD June 4 at 9:50 DST

Open: 1293.67 High: 1298.09 Low: 1290.31 Close: 1296.65

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1236 1260 1285 1307 1337 1375

XAU/USD edged lower in the Asian session. In European trade, the pair has reversed directions and moved higher. XAU/USD is flat in North American trade

  • 1285 is providing support
  • 1307 is the next resistance line
  • Current range: 1285 to 1307

Further levels in both directions:

  • Below: 1285, 1260 and 1236
  • Above: 1307, 1337, 1375 and 1416

OANDA’s Open Positions Ratio

In the Monday session, XAU/USD ratio is showing long positions with a majority (69%). This is indicative of trader bias towards XAU/USD continuing to move to higher 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.