Gold slips on optimism over trade talks and Trump-Kim summit

After a listless start to the week, gold has dropped considerably on Wednesday. In the North American session, the spot price for one ounce of gold is $1320.34, down 0.66% on the day. In economic news, factory orders were up 0.1%, well off the forecast of 1.5%. Pending Home Sales sparkled with a gain of 4.6%, its highest gain in two years. On Thursday, the U.S. releases Advance GDP and unemployment claims.

Gold is sensitive to interest rate policy, so the dovish stance of the Federal Reserve should be bullish for the metal. Fed Reserve Chair Powell underscored this stance on Tuesday, in testimony before a senate committee. Powell said that the Fed was in “no rush to make a judgment” and made reference to “conflicting signals in the economy”. The labor picture remains bright, with strong hiring and low unemployment. At the same time, consumer spending and housing data have been soft. The markets are expecting the Fed to remain on the sidelines in May and June, meaning that the first hike of 2019 will not come before the second half of the year.

There is growing optimism that the U.S. and China will reach an agreement on trade, which would greatly reduce trade tensions which have hurt global economic growth. President Trump has said he will not impose punishing new tariffs on March 1, and there is even talk of a meeting between Trump and Chinese President Xi at the end of March if the sides reach an agreement. However, significant questions remain. With almost no news about the substance of the talks, it remains unclear if China will agree to substantial structural changes in trade, as demanded by the United States. Another question mark is whether the current set of tariffs will be completely removed if a deal is reached. Still, if the sides reach a deal, it could lower risk apprehension and make gold less attractive. Meanwhile, Trump is meeting with North Korean leader Kim in Hanoi, and any progress on dismantling the North Korean arsenal could raise risk appetite and weigh on gold.

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XAU/USD Fundamentals

Wednesday (February 27)

• 8:30 US Goods Trade Balance. Estimate -74.1B. Actual -79.5B
• 8:30 US Preliminary Wholesale Inventories. Estimate 0.4%. Actual 1.1%
• 10:00 US Fed Chair Powell Testifies
• 10:00 US Factory Orders. Estimate 1.5%. Actual 0.1%
• 10:00 US Pending Home Sales. Estimate 0.7%. Actual 4.6%
• 10:30 US Crude Oil Inventories. Estimate 2.8M. Actual -8.6M

Thursday (February 28)

• 8:30 US Advance GDP. Estimate 2.6%
• 8:30 US Unemployment Claims. Estimate 221K
• 20:15 US Fed Chair Powell Speaks

*All release times are EST

*Key events are in bold

XAU/USD for Wednesday, February 27, 2019

XAU/USD February 27 at 11:55 EST

Open: 1328.97 High: 1329.95 Low: 1319.74 Close: 1320.34

XAU/USD Technical

XAU/USD posted small losses in the Asian and European sessions. The pair has dropped considerably 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 and 1261
• Above: 1326, 1344, 1365 and 1392

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