Gold climbs as dovish Fed spooks investors

Gold prices have risen sharply in the Thursday session. In the North American session, the spot price for one ounce of gold is $1260.68, up 1.40% on the day. On the release front, U.S. unemployment claims rose to 214 thousand, just under the forecast of 216 thousand. The Philly Fed Manufacturing Index dropped sharply to 9.4 in November, down from 12.9 a month earlier. This was the lowest level since November 2016. Friday will be busy, with the release of Final GDP, durable goods orders and consumer confidence.

The U.S dollar is in full retreat on Thursday, and gold has taken advantage, posting sharp gains. Gold has punched past the $1260 line for the first time since early July. The catalyst for the strong gains was investor disappointment over the Federal Reserve rate statement. A rate hike had been expected, and the Fed delivered with a quarter-point hike, the fourth of the year. Investors were also looking for a Christmas gift from the Fed, in the form of a dovish rate statement. There was speculation that the Fed would “compensate” investors, given that the markets have been in turmoil for weeks and the U.S. economy appears to be cooling down.

However, the Fed was not in a giving mood, signaling that it plans to continue raising rates in 2019. Policymakers did not remove the phrase “further gradual increases” from their statement, and Fed Chair Jerome Powell added that the “lower end” of the neutral rate range has been achieved. Investors had counted on a more dovish stance from the Fed and responded with a thumbs-down. Equity markets are down sharply on Thursday and investors have snapped up safe-haven assets like gold.

A not so dovish hike by the Fed

All about the FED and the discussions go on.

XAU/USD Fundamentals

Thursday (December 20)

  • 10:00 US CB Leading Index. Estimate 0.0%
  • 10:30 US Natural Gas Storage. Estimate -136B

*All release times are EST

*Key events are in bold

XAU/USD for Thursday, December 20, 2018

XAU/USD December 20 at 5:25 EST

Open: 1243.05 High: 1261.48 Low: 1242.83 Close: 1260.63

XAU/USD Technical

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

In the Asian session, XAU/USD posted slight gains. The pair posted strong gains in the European session and this has continued in North American trade

  • 1236 is providing support
  • 1261 is under strong pressure
  • 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.
Kenny Fisher

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