XAU/USD – Gold jumps to 11-week high, U.S retail sales disappoints

Gold has started the week with sharp gains. In Monday’s North American trade, the spot price for one ounce of gold is $1227.98, up 0.85% on the day. Earlier in the day, gold prices touched a high of $1233, its highest level since mid-July. On the release front, U.S data was mixed. On the release front, U.S retail sales were much softer than expected. Retail Sales posted a meager gain of 0.1%, shy of the estimate of 0.4%. Core Retail Sales surprised with a decline of 0.1%, compared to an estimate of 0.4%. This marked the first decline since June 2017. There was better news from the manufacturing front, as Empire State Manufacturing Index strengthened to 21.1, above the estimate of 20.4 points. Later in the day, the U.S Treasury is expected to release the semi-annual currency report.

Gold prices have dropped sharply in recent months. During the April-September period, gold slumped some 10 percent. However, October has taken a reverse direction, with gains of 3.0 percent. The U.S economy in excellent shape and inflation growing higher, and that has allowed the Federal Reserve to stay on track with gradual increases in interest rates, even with President Trump expressing his displeasure over rate increases. In October, the Fed raised rates for a third time this year, and the odds of a December rate are pegged at 78%, according to the CME Group. Furthermore, the Fed indicated that three more rate hikes are on the way in 2019. This vote of confidence in the economy has strengthened the U.S dollar and conversely, weighed on gold prices.

Will there be any surprises in the U.S Treasury currency report? The report provides details of global exchange rate policies, as well as a list of countries which are deemed currency manipulators. In the April report, the U.S did not name any of its major partners as currency manipulators. Since then, the Trump administration has imposed some $200 billion in tariffs on Chinese goods. China has retaliated with its own tariffs on U.S goods, and there has been speculation that China could respond to the U.S tariffs by devaluating the Chinese yuan in order to bolster Chinese exports. In 2015 and 2016, the markets dropped sharply on fears that China would implement a major devaluation of its currency. Traders should treat the report as a market-mover.

Geopolitical risks and yields dominate proceedings

Risk aversion remains at the start of the week

U.S retail sales increase less than expected in September

XAU/USD Fundamentals

Monday (October 15)

  • 8:30 US Core Retail  Sales. Estimate 0.4%. Actual 0.1%
  • 8:30 US Retail Sales. Estimate 0.7%. Actual -0.1%
  • 8:30 US Empire State Manufacturing Index. Estimate 20.4. Actual 21.1
  • 10:00 US Business Inventories. Estimate 0.5%
  • Tentative – US Treasury Currency Report

Tuesday (October 16)

  • 10:00 US JOLTS Openings. Estimate 6.90M

*All release times are DST

*Key events are in bold

XAU/USD for Monday, October 15, 2018

XAU/USD October 15 at 11:10 DST

Open: 1217.62 High: 1233.29 Low: 1216.99 Close: 1230.14

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1170 1204 1220 1236 1261 1284

XAU/USD edged higher in the Asian session and posted strong gains in the European session. The pair has edged lower in the North American trade

  • 1220 is providing support
  • 1236 is the next resistance line
  • Current range: 1220 to 1236

Further levels in both directions:

  • Below: 1220, 1204, 1170 and 1146
  • Above: 1236, 1261 and 1284

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.