Gold climbs to 1-week high as U.S jobless claims jump

Gold has posted gains in the Thursday session, continuing the trend seen on Wednesday. In North American trade, the spot price for one ounce of gold is $1226.65, up 0.47% on the day. It was a busy day on the release front. Core PCE Price Index dropped to 0.1%, shy of the estimate of 0.2%. Personal Spending improved to 0.6%, above the estimate of 0.4%. On the labor front, unemployment claims jumped to 234 thousand, well above the estimate of 221 thousand. This was the highest level since May. Later in the day, the Federal Reserve releases the minutes of its November policy meeting. On Friday, the U.S. publishes Chicago PMI. As well, the G-20 begins a two-day summit in Argentina.

The G-20 summit commences on Friday, and the highlight of the show promises to be an expected meeting between President Trump and Chinese President Xi Jinping. An exchange of tariffs between the U.S. and China has taken a bite out of the economies of both and could dampen global economic activity. President Trump has taken a tough line on China ahead of the summit, threatening to raise tariffs from 10 percent to 25 percent on $250 billion worth of Chinese goods. Such a move would likely cause serious turbulence in the currency markets. Given Trump’s unpredictability, it remains unclear if he plans to carry out his threat, or is the sharp rhetoric simply grandstanding ahead of his crucial meeting with Xi.

The U.S. dollar was broadly lower on Wednesday, and gold prices took advantage and moved higher. The catalyst was surprising remarks from Jerome Powell, chair of the Federal Reserve. Powell caught the markets off guard when he said that the current benchmark rate of 2-2.5 percent is “just below” the neutral range. This is in sharp contrast to Powell’s remarks just last month, when he said that rates were “a long way from neutral”. Powell’s hasty U-turn is likely due to the change in U.S. economic conditions in recent weeks – GDP has been slowing, the stock markets are down and oil prices have fallen. The Fed may have decided that this required an easing up on rate hikes in 2019, and Powell delivered this message to the markets. Only a few months ago, there was talk of ‘a rate hike each quarter’ in 2019, but now, some analysts are predicting only one or two hikes next year. Despite Powell’s dovish remarks, the odds of a December rate have not diminished, which stand at 79%, according to the CME Group.

The U.S. economy grew 3.5% in the third quarter, as GDP remained unrevised from the first estimate in October. This is considerably slower than the sizzling 4.2% gain in the second quarter, but still points to a strong economy. However, there is concern that slower growth will translate into a scaling back of interest rate hikes, which would be bearish for the U.S. dollar but good news for gold prices.

XAU/USD Fundamentals

Thursday (November 29)

  • 8:30 US Core PCE Price Index. Estimate 0.2%. Actual 0.1%
  • 8:30 US Personal Spending. Estimate 0.4%. Actual 0.6%
  • 8:30 US Unemployment Claims. Estimate 221K. Actual 235K
  • 8:30 US Personal Income. Estimate 0.4%. Actual 0.4%
  • 10:00 US Pending Home Sales. Estimate 0.8%. Actual -2.6%
  • 10:30 US Natural Gas Storage. Estimate -76B. Actual -59B
  • 14:00 US FOMC Meeting Minutes

Friday (November 30)

  • Day 1 – G-20 Meetings
  • 9:45 US Chicago PMI. Estimate 58.6

*All release times are EST

*Key events are in bold

XAU/USD for Thursday, November 29, 2018

XAU/USD November 29 at 12:05 EST

Open: 1220.96 High: 1229.07 Low: 1220.56 Close: 1226.65

XAU/USD Technical

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

XAU/USD posted considerable gains in the Asian session. The pair was flat in European trade and this trend has continued in 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.