Gold has lost ground on Thursday, after posting strong gains a day earlier. In North American trade, the spot price for one ounce of gold is $1289.19, down 0.30% on the day. In economic news, unemployment claims dropped sharply to 216 thousand, below the forecast of 226 thousand. On Friday, the U.S. releases CPI and Core CPI, which should be treated as market-movers.
The U.S. dollar was broadly lower on Wednesday after the release of the Fed minutes from the December meeting, and gold took advantage with strong gains. At the meeting, the Fed raised rates for a fourth time in 2018, culminating a very aggressive stance. This was reflected in the rate statement, but then came the thumbs-down from investors, who wanted a more dovish approach, and sent the equity markets into a tailspin. Fed policymakers have since made a sharp U-turn and are sounding much more cautious about future rate hikes. The minutes noted low inflation meant that the Fed can “afford to be patient about further policy firming”. Even more striking, the minutes revealed that at the December meeting, some policymakers opposed a rate hike, arguing that inflation was too low to warrant higher rates. Just a few months ago, there was talk of another three or four hikes in 2019, but now the Fed is projecting two increases, and some analysts have even predicted a cut in rates late in the year.
Investor optimism is higher this week, as hopes are high that trade tensions between the U.S. and China could ease. The world’s two largest economies have been engaged in a nasty tariff spat, which has rocked the markets in recent weeks and threatens to put a chill on global growth. Chinese and U.S. officials met in China this week and the talks reportedly produced “minor progress”, raising hopes that the sides will reach an agreement and ease global trade tensions. The stakes are high, as President Trump has threatened to impose higher tariffs on $250 billion worth of Chinese products if there is no deal by March 1. The success of these talks could have a significant impact on gold prices. If a deal is reached, investor optimism would soar, and safe-haven gold would likely fall. Conversely, if the new tariffs take effect in March, gold prices would likely move higher.
Thursday (January 10)
- 8:30 US Unemployment Claims. Estimate 226K. Actual 216K
- 10:30 US Natural Gas Storage. Estimate -62B. Actual -92B
- 12:40 US FOMC Member Bullard Speaks
- 12:45 US Fed Chair Powell Speaks
- 13:01 US 30-year Bond Auction
Friday (January 11)
- 8:30 US CPI. Estimate -0.1%
- 8:30 US Core CPI. Estimate 0.2%
*All release times are EST
*Key events are in bold
XAU/USD for Thursday, January 10, 2019
XAU/USD January 10 at 12:15 EST
Open: 1293.20 High: 1297.15 Low: 1288.29 Close: 1289.19
XAU/USD edged higher in the Asian session but gave up these gains in European trade. The pair continues to lose ground 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 1355