Gold slides on Fed rate hike, strong GDP

Gold has posted sharp losses in the Thursday session, continuing the downward trend seen on Wednesday. In North American trade, the spot price for one ounce of gold is $1184.02, down 0.88% on the day. On the release front, Final GDP in Q2 matched the estimate, with a gain of 4.2%. Core durable goods orders jumped 4.5%, crushing the estimate of 1.9%. However, durable goods orders came in at 0.1%, missing the forecast of 0.4%. On Friday, the U.S will publish Personal Spending and UoM Consumer Sentiment.

There were no surprises from the Federal Reserve, which hiked rates for the third time this year, raising the benchmark rate by a quarter-point, to a range of 2 percent to 2.25 percent. The Fed intends to continue gradually raising rates, with another rate hike expected in December and three hikes in 2019. What was of more interest to investors was the rate statement, in which the Fed removed the word ‘accommodative’ in the statement, which means that the Fed now considers monetary policy to be neutral. Fed Chair Jerome Powell, in a bid to keep markets calm, stated in a follow-up press conference that removing accommodative language in the statement did not reflect a change in policy. Still, the markets were upbeat after the Fed meeting and the U.S dollar has responded with broad gains on Thursday.

Although the markets had priced in a rate hike from the Fed, the move nonetheless boosted the U.S dollar and sent gold prices sharply lower. The Fed indicated that it plans another hike in December and three more in 2019, which is bullish news for the U.S dollar. Gold has responded with sharp losses and earlier on Thursday dropped to $1181, its lowest level since mid-August. A strong Final GDP report for Q2 has also boosted risk appetite and dampened sentiment for gold. If key consumer data on Friday is strong, the dollar rally could continue.

Euro tumbles on talk Italy to delay budget meeting

Gold rises after limited impact from Fed hike

U.S Q2 GDP growth unrevised

XAU/USD Fundamentals

Thursday (September 27)

  • 8:30 US Core Durable Goods Orders. Estimate 0.4%. Actual 0.1%
  • 8:30 US Final GDP. Estimate 4.2%. Actual 4.2%
  • 8:30 US Durable Goods Orders. Estimate 1.9%. Actual 4.5%
  • 8:30 US Final GDP Price Index. Estimate 3.0%. Actual 3.0%
  • 8:30 US Goods Trade Balance. Estimate -70.6B. Actual -75.8B
  • 8:30 US Preliminary Wholesale Inventories. Estimate 0.3%. Actual 0.8%
  • 8:30 US Unemployment Claims. Estimate 208K. Actual 214K
  • 10:00 US Pending Home Sales. Estimate -0.2%
  • 10:30 US Natural Gas Storage. Estimate 64B
  • 16:30 US Fed Chair Powell Speaks

Friday (September 28)

  • 8:30 US Personal Spending. Estimate 0.3%
  • 10:00 US Revised UoM Consumer Sentiment. Estimate 100.5

*All release times are DST

*Key events are in bold

XAU/USD for Thursday, September 27, 2018

XAU/USD September 27 at 12:20 DST

Open: 1194.52 High: 1198.65 Low: 1181.91 Close: 1184.02

XAU/USD Technical

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

XAU/USD edged higher the Asian session. The pair reversed directions and recorded sharp losses in European trade. The pair continues to lose ground 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

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.