Gold edges higher as China surprises with dismal data

Gold has started the week with slight gains in the Monday session. In North American trade, the spot price for one ounce of gold is $1290.67, up 0.22% on the day. There are no U.S. indicators on the schedule. On Tuesday, the U.S. releases PPI reports and the Empire State Manufacturing Index.

On Monday, China released unexpectedly weak data, with exports down 4.4 percent from a year earlier and imports plunging 7.6 percent. The slowdown in China has taken a toll on corporate profits, with Apple and Jaguar Land Rover posting revenue warnings. Investors will be keeping a close eye on Chinese numbers, and further signs of a slowdown from the world’s second largest economy could raise risk apprehension and bolster safe-haven gold.

Gold is sensitive to moves in interest rates, and the Fed’s surprisingly dovish stance could boost gold prices. Fed Chair Powell is now preaching prudence and patience, and the minutes from the Fed’s December meeting, released Wednesday, noted that low inflation levels meant that the Fed could “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. On Thursday, Fed Chair Jerome Powell said he was “very worried” about the massive U.S. debt and reiterated that the Fed would remain patient on monetary policy. Given that further interest rate hikes would hurt the debt burden of corporate borrowers, Powell’s remarks on the debt could be a sign that the Fed will take a pause on rate hikes in the near future, and perhaps even entertain a rate cut this year. The sharp U-turn on monetary policy by the Fed could continue to weigh on the U.S dollar for the near future, and that could spell gains for gold.

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XAU/USD Fundamentals

* There are no U.S events

XAU/USD for Monday, January 14, 2019

XAU/USD January 14 at 12:35 EST

Open: 1287.62 High: 1295.94 Low: 1287.50 Close: 1290.67

XAU/USD Technical

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

XAU/USD posted small gains in the Asian session and stronger gains in  European trade. The pair has reversed directions and given up most of 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 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.