Gold subdued, U.S inflation data disappoints

Gold is almost unchanged in the Tuesday session. In North American trade, the spot price for one ounce of gold is $1291.18, down 0.02% on the day. In economic news, inflation indicators missed their estimates. PPI declined by 0.2%, missing the forecast of -0.1%. This was the weakest reading since July 2016. Core PPI dropped by 0.1%, shy of the estimate of 0.2%. There was no relief from the manufacturing sector, as the Empire State Manufacturing Index plunged to 3.9 points, down from 10.9 points a month earlier, and short of the estimate of 11.6 points.

After an aggressive 2018, the Federal Reserve is expected to ease up on rate policy this year. However, it’s not at all clear what to expect from the Fed in 2019. There is a large discrepancy between Fed forecasts and market expectations, which could result in volatility in the currency markets. The most recent projections from individual policymakers in the Federal Open Market Committee (FOMC) stands at two rate hikes this year, but the markets are expecting the Fed to hold pat and not raise rates in 2019. Moreover, the markets have priced in a rate cut before the end of the year at 28 percent. On Monday, former Fed Chair Janet Yellen said that she expected the Fed to take a breather, saying that it’s ‘very possible’ that the Fed has made its last hike of this cycle.

Risk appetite has improved in January, but a weaker Chinese economy could spook investors. On Monday, China released unexpectedly soft 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. Further signs of a slowdown from the world’s second largest economy could raise risk apprehension and bolster safe-haven gold.

Markets flat ahead of Brexit vote

Empire State Manufacturing Survey declines to 3.9 v 10.0 eyed, lowest level in over a year

XAU/USD Fundamentals

Tuesday (January 15)

  • 8:30 US PPI. Estimate -0.1%. Actual -0.2%.
  • 8:30 US Core PPI. Estimate 0.2%. Actual -0.1%
  • 8:30 US Empire State Manufacturing Index. Estimate 11.6. Actual 3.9
  • 10:00 US IBD/TIPP Economic Optimism. Actual 53.1
  • 13:00 US FOMC Member George Speaks

*All release times are EST

*Key events are in bold

XAU/USD for Tuesday, January 15, 2019

XAU/USD January 15 at 11:00 EST

Open: 1291.42 High: 1294.70 Low: 1287.60 Close: 1291.18

XAU/USD Technical

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

XAU/USD recorded small gains in the Asian session but then retracted. In European trade, the pair edged lower but then recovered. The pair is showing stronger movement 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.