Gold edges higher as U.S services PMI disappoints

Gold has started the new trading week with modest gains. In Monday’s North American session, the spot price for one ounce of gold is $1288.24, up 0.25% on the day. Gold ended the week with considerable losses, after the U.S. released sharp employment numbers. Nonfarm payrolls jumped to 312 thousand, its highest level since February, while wage growth improved to 0.4%, up from 0.2% in the previous release.

On the release front, there was only one U.S event on Monday. The ISM Non-Manufacturing PMI, dropped to 57.6 in December, down from 60.7 in November. The reading missed expectations, but still points to strong expansion in the services sector. On Tuesday, the U.S. will post JOLTS Job Openings.

Volatility in the global stock markets, which were evident in much of December, was bullish for gold, which recorded an impressive December rally of 4.9%. The turmoil in the markets continued into January, with sharp swings last week. Stock markets fell sharply on Wednesday, after Apple shocked the markets when it lowered its sales forecast for this quarter, blaming a drop in sales of iPhones in China. Jittery investors headed for safety, but the Japanese yen was the big winner last week, while safe-haven gold posted eked out only small gains.

Risk appetite improved late in the week, after dovish comments from Fed Chair Jerome Powell. Investors were unhappy with the Fed’s December rate statement, which was less dovish than expected, as the Fed said it would continue raising interest rates in 2019. Powell tempered this stance on Thursday with a more cautious outlook over rate policy. He said that he was aware of the risks of a slowdown in the U.S. economy and that the Fed would be patient in its policy decisions. The Fed is currently forecasting two rate hikes next year, but some analysts have forecast a rate cut next year, with the U.S. economy expected to slow down, compared to its torrid pace in 2018.

Stocks pause as focus shifts to trade talks

Improved risk appetite supports dollars demise

XAU/USD Fundamentals

Monday (January 7)

  • 10:00 US ISM Non-Manufacturing PMI. Estimate 59.6. Actual 57.6

Tuesday (January 8)

  • 8:30 US Trade Balance. Estimate -54.0B
  • 10:00 US JOLTS Job Openings. Estimate 7.17M

*All release times are EST

*Key events are in bold

XAU/USD for Monday, January 7, 2019

XAU/USD January 7 at 12:20 EST

Open: 1285.15 High: 1295.11 Low: 1282.73 Close: 1288.24

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1236 1261 1284 1306 1326 1355

XAU/USD edged higher in the Asian session. The pair posted further gains in European trade, but has given up these gains in North American trade.

  • 1284 is providing support
  • 1306 is the next resistance line
  • Current range: 1284 to 1306

Further levels in both directions:

  • Below: 1284, 1261, 1236 and 1220
  • Above: 1306, 1326 and 13550

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.