Gold slips below $1200 as Fed poised to raise rates

Gold has posted considerable losses in the Wednesday session. In North American trade, the spot price for one ounce of gold is $1195.52, down 0.46% on the day. On the release front, New Home Sales edged up to 629 thousand, just shy of the estimate of 630 thousand. In the U.S, the focus is on the Federal Reserve, which is virtually certain to raise the benchmark rate to a range between 2.00% and 2.25%. On Thursday, the U.S will publish Final GDP and durable goods orders.

Gold prices are sensitive to interest rate moves, so traders can expect some movement from gold during the North American session. Even though a rate hike has been priced in by the markets, investors are awaiting the rate statement, as policymakers weigh in on the strength of the economy and perhaps on future rate policy. What will be the tone of the rate statement? The U.S economy is in excellent shape, with GDP for Q2 expected at 4.2%, unemployment hovering below 4 percent and inflation moving closer to the Fed target of 2 percent. However, the escalating global trade war has raised concerns that it could cool down global economic growth and hurt the U.S economy as well. Still, another rate hike in December is pegged at 78% according to the CME, and some experts are predicting up to four rate hikes in 2019. If the Fed message to the markets is one of optimism, risk appetite will increase and gold prices could continue to move lower.

Decision Day : The FOMC looms

US Dollar steadies ahead of FOMC decision

Look to Fed’s Powell for help

XAU/USD Fundamentals

Wednesday (September 26)

  • 10:00 US New Home Sales. Estimate 630K. Actual 629K
  • 10:30 US Crude Oil Inventories
  • 14:00 US FOMC Economic Projections
  • 14:00 US FOMC Statement
  • 14:00 US Federal Funds Rate. Estimate <2.25%
  • 14:30 FOMC Press Conference

Thursday (September 27)

  • 8:30 US Core Durable Goods Orders. Estimate 0.4%
  • 8:30 US Final GDP. Estimate 4.2%
  • 8:30 US Durable Goods Orders. Estimate 1.9%
  • 16:30 US Fed Chair Powell Speaks

*All release times are DST

*Key events are in bold

 

XAU/USD for Wednesday, September 26, 2018

XAU/USD September 26 at 10:10 DST

Open: 1201.08 High: 1202.53 Low: 1194.28 Close: 1195.52

 

XAU/USD Technical

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

XAU/USD was flat in the Asian session. The pair posted losses in the European session and is steady in North American trade

  • 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.