Gold slide continues as dollar shrugs off soft durables reports

Gold has posted losses for a third straight day. In Wednesday’s North American session, the spot price for one ounce of gold is $1254.37, down 0.36% on the day. On the release front, economic data was weak. Durable goods indicators pointed to contraction, and Pending Home Sales came in at -0.5%, marking a second straight decline. This missed the estimate of a 0.4% gain. On Thursday, the U.S will publish Final GDP for the first quarter and unemployment claims.

Gold prices continue to head lower this week. Earlier on Wednesday, gold prices set another record low for 2018, at $1252.70. With investors flocking to the U.S dollar as trading tensions worsen, there appears to be more downside potential for the base metal. It has been anything but a sunny June for gold investors, as gold has fallen 3.4% this month. Traditionally, gold acts a safe-haven asset during times of trouble, but that hasn’t been the case in the escalating tariff battle between the U.S and China, which if left unchecked, could hurt both economies and trigger a global recession.

U.S durable goods indicators pointed downward in May. Core durable goods orders declined 0.3%, well of the estimate of 0.5% and a 4-month low. Durable goods orders declined for a second straight month, with a reading of -0.6%. Still, this was better than the forecast of -0.9%. Despite the soft May numbers, the data for April was revised upwards, so business spending on equipment is expected to show moderate growth in the second quarter. However, the escalating trade war between the U.S and its trading partners could dampen business spending and send the U.S dollar downwards.

As the second quarter draws to a close, the U.S economy continues to perform well. Economic growth has been strong and the labor market is close to capacity. However, the trade war between the U.S and its major partners could be the dark cloud on the horizon. The Federal Reserve now plans to raise rates four times in 2018 (up from three), but a global trade war could force the Fed to revise its forecast back to three hikes. On Tuesday, Atlanta Fed bank president Raphael Bostic said that if the trade war intensified, he would vote against a fourth rate hike, due to downside risks to the economy. Fed Chair Jerome Powell sounded pessimistic about the economic effects of trade tensions at an ECB forum earlier in June, and if other Fed members express concerns, a fourth rate hike could be delayed until 2019.

  US Treasury Secretary Warns of Forthcoming Announcement on Investment Restrictions

  Trade spats continue to weigh

XAU/USD Fundamentals

Wednesday (June 27)

  • 8:30 US Core Durable Goods Orders. Estimate 0.5%. Actual -0.3%
  • 8:30 US Durable Goods Orders. Estimate -0.9%. Actual -0.6%
  • 10:00 US Pending Home Sales. Estimate 0.4%. Actual -0.5%
  • 10:30 US Crude Oil Inventories. Estimate -2.4M. Actual -9.9M
  • 11:00 US FOMC Member Quarles Speaks

Thursday (June 28)

  • 8:30 US Final GDP. Estimate 2.2%
  • 8:30 US Unemployment Claims. Estimate 220K

*All release times are DST

*Key events are in bold

XAU/USD for Wednesday, June 27, 2018

XAU/USD June 27 at 12:15 DST

Open: 1258.84 High: 1260.07 Low: 1252.70 Close: 1254.37

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1204 1220 1236 1260 1285 1307

XAU/USD edged lower in the Asian session but recovered these gains in European trade. The pair has posted losses in North American trade

  • 1236 is providing support
  • 1260 was tested earlier in resistance. It is a weak line
  • Current range: 1236 to 1260

Further levels in both directions:

  • Below: 1236, 1220, 1204
  • Above: 1260, 1285, 1307 and 1322

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.