Gold rally takes pause ahead of Fed rate statement

Gold is unchanged in the Wednesday session. In North American trade, the spot price for one ounce of gold is $1311.64, up 0.01% on the day. On the release front, investors are awaiting the conclusion of the Federal Reserve monthly meeting. With the Fed expected to remain on the sidelines, investors will be focusing on the rate statement, which is expected to be dovish in tone. The ADP nonfarm employment change fell to 213 thousand, but still beat the estimate of 180 thousand. On Thursday, the U.S. publishes Employment Cost Index and unemployment claims.

Gold is sensitive to interest rate moves, so traders should treat the Federal Reserve rate statement as a market-mover. The Fed was aggressive in 2018, raising rates by a quarter-point on four occasions. With a nasty trade war dampening global economic growth, it is clear that the Fed will ease up on monetary policy this year. But, by how much? There are a various answers, depending on who you ask. The markets are not expecting any increases this year, while the Federal Reserve continues to stick with a forecast of two hikes. The Congressional Budget Office has also weighed in, saying that it expects further rate increases this year. Investors will be combing through the rate statement, looking for clues as to the timing of the next rate hike.

Will the gold rally continue? The metal has sparkled, jumping 7.5% in Q4 adding another 2.2% in January. The metal is at 8-month highs, benefitting from geopolitical hotspots such as the U.S-China trade war, Brexit, and a more dovish Federal Reserve. Investors remain cautious, and safe-haven gold has been an attractive alternative to the recent turmoil in the equity markets.

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XAU/USD Fundamentals

Wednesday (January 30)

  • 8:15 US ADP Nonfarm Employment Change. Estimate 180K. Actual 213K
  • 14:00 US FOMC Statement
  • 14:00 US Federal Funds Rate. Estimate <2.50%
  • 14:30 US FOMC Press Conference

Thursday (January 31)

  • 8:30 US Employment Cost Index. Estimate 0.8%
  • 8:30 US Unemployment Claims. Estimate 215K

*All release times are EST

*Key events are in bold

XAU/USD for Wednesday, January 30, 2019

XAU/USD January 30 at 12:15 EST

Open: 1311.48 High: 1316.00 Low: 1309.53 Close: 1311.68

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1261 1284 1306 1326 1344 1365

In the Asian session, XAU/USD edged higher. The pair posted further gains in European trade but then retracted. XAU/USD is showing limited movement in North American trade

  • 1306 is providing support
  • 1326 is the next resistance line
  • Current range: 1306 to 1326

Further levels in both directions:

  • Below: 1306, 1284, 1261 and 1236
  • Above: 1326, 1344 and 1365

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.