Gold edges lower as fallout from Powell comments weigh on greenback

Gold has posted slight losses in the Tuesday session. In North American trade, the spot price for one ounce of gold is $1286.20, down 0.21% on the day. There are no major indicators on the schedule. JOLTS Job Openings was unexpectedly soft, dropping to 6.83 million. This marked a four-month low. On Wednesday, the Federal Reserve releases the minutes of its December meeting, when it raised rates.

The volatility in equity markets which marked December has continued into January. Somewhat surprisingly, the swings we saw last week were not reflected in gold prices, which have shown limited movement in January. In sharp contrast, December was a banner month for gold, which climbed an impressive 4.9%.

Risk appetite sank after the Apple debacle last week, but investor optimism has returned. A key catalyst for the enthusiasm has been the Federal Reserve, which has made a U-turn and is sounding much more dovish than just a few weeks ago. 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. Fed Chair Powell engaged in some damage control on Friday, saying any rate decisions would be done prudently and with patience.

The Fed seems to be lowering expectations for additional rate hikes. Recent Fed forecasts have indicated two rate increases this year, but on Monday, Atlanta Fed President Raphael Bostic said that the economy would need only one rate hike. Some analysts have gone further, projecting a rate cut in 2019, which has put a chill on sentiment towards the U.S. dollar and could be bullish for gold.

The Powell “Put” continues to resonate

A bit of the feel-good factor has temporarily abated

XAU/USD Fundamentals

Tuesday (January 8)

  • 5:20 US NFIB Small Business Index. Estimate 103.1. Actual 104.4
  • 10:00 US JOLTS Job Openings. Estimate 7.07M. Actual 6.89M
  • 15:00 US Consumer Credit. Estimate 17.3B
  • 21:00 US President Trump Speaks

Wednesday (January 9)

  • 14:00 US FOMC Meeting Minutes

*All release times are EST

*Key events are in bold

XAU/USD for Tuesday, January 8, 2019

XAU/USD January 8 at 13:00 EST

Open: 1288.90 High: 1290.31 Low: 1279.45 Close: 1286.20

XAU/USD Technical

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

XAU/USD posted losses in the Asian session. The pair was flat in European trade and has posted slight gains in North American trade

  • 1284 was tested earlier in support and remains under pressure
  • 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 1355

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.