Gold slips below $1200 as tariff jitters boost dollar

Gold has posted sharp losses in the Tuesday session. In North American trade, the spot price for one ounce of gold is $1192.75, down 0.72% on the day. Earlier in the day, gold prices dropped to $1189, their lowest level since August 24. On the release front, ISM Manufacturing PMI jumped to 61.3, well above the estimate of 57.6 points.

Escalating trade tensions have boosted the U.S dollar, at the expense of gold as well as other currencies. The dollar is benefiting from being the primary reserve currency. The most important trade dispute, which could cause serious damage to the global economy, is the spat between the U.S and China. So far, the two economic giants have imposed $50 billion in tariffs on each other, and President Trump has threatened further tariffs worth some $200 billion, which could be imposed as early as Thursday. The U.S could elect to impose the tariffs in smaller bites, such as a $50 billion tariff. Trade talks continue between the U.S and Canada, as the NAFTA agreement, worth some $1 trillion in trade, has yet to be finalized. The EU has also engaged in a tit-for-tat tariff exchange with the United States, and Japan has also been subject to U.S tariffs. With the U.S economy running smoothly and showing little ill-effect from the tariffs, President Trump could be emboldened to ratchet up tariffs, particularly against China. If the trade tensions worsen, the US currency could continue to gain ground and gold prices could suffer.

XAU/USD Fundamentals

Tuesday (September 4)

  • 9:45 US Final Manufacturing PMI. Estimate 54.5. Actual 54.7
  • 10:00 US ISM Manufacturing PMI. Estimate 57.6. Actual 61.3
  • 10:00 US Construction Spending. Estimate 0.5%. Actual 0.1%
  • 10:00 US ISM Manufacturing Prices.  Estimate 74.0. Actual 72.1
  • Tentative – US IBD/TIPP Economic Optimism. Estimate 57.2. Actual 55.7
  • All Day – US Total Vehicle Sales. Estimate 16.7M

*All release times are DST

*Key events are in bold

 

XAU/USD for Tuesday, September 4, 2018

XAU/USD September 4 at 12:30 DST

Open: 1201.39 High: 1202.32 Low: 1189.72 Close: 1192.75

 

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1115 1146 1170 1204 1220 1236

XAU/USD ticked lower in the Asian session. The pair posted losses in European trade and the downward trend continues in the North American session

  • 1170 is providing support
  • 1204 is the next resistance line
  • Current range: 1170 to 1204

Further levels in both directions:

  • Below: 1170, 1146 and 1115
  • Above: 1204, 1220, 1236 and 1261

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.