Gold higher as US dollar rally fizzles

Gold has posted considerable gains in the Wednesday session, erasing much of the losses which marked Tuesday. In North American trade, the spot price for one ounce of gold is $1197.16, up 0.50% on the day. In the U.S, the sole event was Trade Balance. The trade deficit continued to widen in July, with a reading of -$50.1 billion. This marked the highest deficit in 5 months. On Thursday, the U.S releases ADP nonfarm payrolls, unemployment claims and the ISM Non-Manufacturing PMI.

The U.S dollar was broadly stronger on Tuesday, as trade tensions boosted the U.S dollar against its major rivals, as well as gold. The momentum has reversed on Wednesday, as gold has risen close to the symbolic $1200 level. Investors continue to keep an eye on Thursday, when President Trump could announce further trade sanctions against China. Trade tensions have been on the rise since April, when the U.S started imposed tariffs to protest its claim of unfair trade practices by its trading partners, in particular, China. The dollar has benefited from the global trade war, and further tariffs against China could boost the greenback and send gold prices lower.

Emerging markets continue to struggle, as nations such as Argentina and Indonesia are experiencing major declines in their currencies against the U.S dollar. This has triggered heavy losses in emerging equity markets, and fears that this could hamper global growth are weighing on European and North American markets as well. If the sell-off in the emerging markets continue to spiral downwards, the U.S dollar could gain more ground.

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 Wednesday, September 5, 2018

XAU/USD September 5 at 12:30 DST

Open: 1191.41 High: 1198.48 Low: 1190.08 Close: 1197.16

XAU/USD Technical

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

XAU/USD posted slight gains in the Asian session. The pair was flat in European trade and has moved higher 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.