Gold sparkles as U.S dollar falters, Fed minutes loom

Gold has posted gains in the Wednesday session, continuing its strong rally. In North American trade, the spot price for one ounce of gold is $1344.97, up 0.30% on the day. On the release front, there are no U.S. data events. The FOMC releases the minutes of its January policy meeting. On Thursday, the U.S. releases durable goods orders and unemployment claims.

Will the gold rally continue after the release of the Federal Reserve minutes? Gold is sensitive to rate policy, so traders should be prepared for some movement from gold in the North American session. The Fed acted aggressively in 2018, boosting rates four times in order to keep the red-hot U.S. economy from overheating. Since raising rates in December, however, the Fed has changed direction and become much more dovish. In the January rate statement, the Fed discarded previous pledges of “further gradual increases” in interest rates, and said it would be “patient” before any further hikes. The current Fed projection calls for two rate hikes this year, but that is subject to change, based on the strength of the U.S. economy. The markets have priced in a hold on rates for the near-term, with little expectation of a rate hike in the first half of the year.

With the U.S. and China continuing their trade talks, there is growing optimism that the parties are narrowing their differences. Treasury Secretary Steven Mnuchin joined the talks last week and called the negotiations “productive”. The U.S. has threatened to impose stiff new tariffs on March 1, but on Tuesday, President Trump said that the talks were going well and that March 1 was not a “magical day”. There has been little progress to report, but the fact that the sides are currently conducting a fourth round of talks has raised optimism among investors. If Trump discards the March 1 deadline, risk appetite would likely jump, which could dampen the enthusiasm for safe-haven gold.

A golden day for sterling

Yen weakens on delayed reaction to Kuroda

Dollar falls for a fifth straight session

XAU/USD Fundamentals

Wednesday (February 20)

  • 14:00 US FOMC Meeting Minutes

Thursday (February 21)

  • 8:30 US Core Durable Goods Orders. Estimate 0.2%
  • 8:30 US Durable Goods Orders. Estimate 0.8%
  • 8:30 US Philly Fed Manufacturing Index. Estimate 15.6
  • 8:30 US Unemployment Claims. Estimate 220K

*All release times are EST

*Key events are in bold

XAU/USD for Wednesday, February 20, 2019

XAU/USD February 20 at 12:00 EST

Open: 1341.01 High: 1346.74 Low: 1339.44 Close: 1344.97

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1284 1306 1326 1344 1365 1392

XAU/USD has posted slight gains in the Asian session. The pair has shown limited movement in European and North American sessions

  • 1326 is providing support
  • 1344 is under pressure in resistance. It could break during the North American session
  • Current range: 1326 to 1344

Further levels in both directions:

  • Below: 1326, 1306, 1284 and 1261
  • Above: 1344, 1365 and 1392

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.