Gold punches above $1250, Fed expected to press rate trigger

Gold has posted gains in the Tuesday session. In North American trade, the spot price for one ounce of gold is $1248.60, up 0.21% on the day. On the release front, construction numbers improved in November. Building Permits jumped to 1.33 million, up from 1.27 million in October. Housing starts climbed 1.26 million, compared to 1.23 million a month earlier. Both readings beat their estimates. The markets will be keeping a close eye on the Federal Reserve, which is expected to raise the benchmark rate by a quarter-point.

The Federal Reserve holds its final policy meeting of the year on Wednesday, and is widely expected to raise rates by a quarter-point. However, this could well be the last rate hike until well into 2019. Just one week ago, the CME Group had set the odds of rate hike at 80%, but this has fallen to 69%. A key factor in the drop is the latest equity sell-off. The week started poorly, as the S&P fell on Monday to its lowest level since October 2017. Rate hikes are unusual when stock markets are swooning, so traders should be prepared for the Fed to send a dovish message to the markets, along with a quarter-point rate hike. This could send the dollar downwards on Wednesday.

The U.S. released consumer November spending and inflation numbers last week. Although the numbers were down compared to October, the indicators show that the economy has lost some steam but still remains strong. Retail sales climbed in November, but the gains were muted compared to October. Core retail sales dropped from 0.7% to 0.2%, while retail sales declined to 0.2%, down from 0.8%. Still, retail sales managed to beat the estimate of 0.1%. Lower oil prices have boosted consumer spending, which is expected to look strong in the fourth quarter.

Housing Starts and Building Permits Rise

Can the Fed salvage the Santa rally?

XAU/USD Fundamentals

Tuesday (December 18)

  • 8:30 US Building Permits. Estimate 1.27M
  • 8:30 US Housing Starts. Estimate 1.23M

Wednesday (December 19)

  • 14:00 US FOMC Economic Projections
  • 14:00 US FOMC Statement
  • 14:00 US Federal Funds Rate. Estimate <2.50%
  • 14:30 US FOMC Press Conference

*All release times are EST

*Key events are in bold

XAU/USD for Tuesday, December 18, 2018

XAU/USD December 18 at 12:05 EST

Open: 1245.96 High: 1250.39 Low: 1245.17 Close: 1248.60

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1204 1220 1236 1261 1284 1306

In the Asian session, XAU/USD edged higher. The pair lost ground in the European trade but then recovered. XAU/USD has recorded small gains in North American trade

  • 1236 is providing support
  • 1261 is the next resistance line
  • Current range: 1236 to 1261

Further levels in both directions:

  • Below: 1236, 1220, 1204 and 1170
  • Above: 1261, 1284 and 1306

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.