Gold Steady as Federal Reserve in Focus

Gold has posted small gains in the Wednesday session. In North American trade, the spot price for one ounce of gold is $1297.73, up 0.13% on the day. On the release front, the Federal Reserve is expected to raise interest rates to a range between 1.75% and 2.00%. On the inflation front, there was positive news. The Producer Price Index jumped to 0.5%, well above the estimate of 0.1%. This marked the highest gain since April 2017. Core PPI edged up to 0.3%, above the forecast of 0.2% percent. On Thursday, the U.S releases retail sales reports and unemployment claims.

All eyes are on the Federal Reserve, which winds up its 2-day policy meeting on Wednesday. The Fed is widely expected to raise rates to a range between 1.75% and 2.0%. The odds of a quarter-point move stand at 96% percent, according to the CME Group. Although a rate hike has been priced in by the markets, such a significant move could boost the U.S dollar against its rivals. Investors will be paying close attention to the language of the rate statement as well as the “dot-plot” forecasts, looking for any clues regarding rate hikes in the second half of 2018. The Fed is currently projecting a total of three hikes this year, but a strong economy and rising inflation have raised speculation that the Fed could raise rates four times in 2018.

The Trump-Kim summit continues to dominate the headlines, but it appears to be a case of symbolism over substance. The joint statement put out by Presidents Trump and Kim was short on details, which could explain a lack of movement in gold prices this week. The joint statement reaffirmed North Korea’s full commitment to complete denuclearization, but there was no mention of a timetable or any verification mechanisms. At the same time, even if the summit was largely symbolic, there’s no denying that tensions have significantly eased and that the summit could mark a first step in bringing peace to the Korean peninsula. If investors sense that progress is being made over the longstanding conflict in Korea, risk appetite could climb and send gold prices downwards.

 

XAU/USD Fundamentals

Wednesday (June 13)

  • 8:30 US PPI. Estimate 0.3%. Actual 0.5%
  • 8:30 US Core PPI. Estimate 0.2%. Actual 0.3%
  • 10:30 US Crude Oil Inventories. Estimate -1.4M
  • 14:00 US FOMC Economic Projections
  • 14:00 US FOMC Statement
  • 14:00 US Federal Funds Rate. Estimate <2.00%
  • 14:30 US FOMC Press Conference

Thursday (June 14)

  • 8:30 US Core Retail Sales. Estimate 0.5%
  • 8:30 US Retail Sales. Estimate 0.4%
  • 8:30 US Unemployment Claims. Estimate 223K

*All release times are DST

*Key events are in bold

XAU/USD for Wednesday, June 13, 2018

XAU/USD June 13 at 12:15 DST

Open: 1296.00 High: 1298.99 Low: 1292.29 Close: 1297.73

 

XAU/USD Technical

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

XAU/USD showed little movement in the Asian and European sessions. The pair has posted small gains 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

XAU/USD ratio is showing slight movement towards long positions in the Wednesday session. Currently, long positions have a majority (70%), indicative of trader bias towards XAU/USD reversing directions and moving 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.