Gold jumps to 3.5-month high as Fed hints at rate cut

Gold has resumed its winning ways on Wednesday. In the North American session, the spot price for one ounce of gold is $1329.28, up 0.30% on the day. In the U.S., ADP nonfarm payrolls posted a meager gain of 27 thousand, compared to the estimate of 185 thousand. In the services sector, the ISM Non-Manufacturing PMI improved to 56.9, above the estimate of 55.6. On Thursday, the U.S. posts unemployment claims.

Gold prices continue to head higher. The base metal climbed 1.7% in May and has added another 1.8% in the first week of June. Earlier on Wednesday, gold touched $1344, its highest level since mid-February. Trade tensions between the U.S. and China have worsened, making safe-haven gold an attractive asset to nervous investors. The upward trend has continued this week, after senior Fed officials hinted at a rate cut later in the year. On Tuesday, Fed chair Jerome Powell said that the Fed would “act as appropriate to sustain the expansion”, and analysts noted that he did not mention his “patient” approach to monetary policy, which has been a buzzword in Powell’s recent comments.

Powell’s comments followed those of James Bullard, president of the St. Louis Fed. Bullard stated that the Fed might have to lower rates shortly due to low inflation and the ongoing trade war with China. Bullard warned that the Fed may have to deal with “an economy that is expected to grow more slowly going forward, with some risk that the slowdown could be sharper than expected due to ongoing global trade regime uncertainty“. Bullard added that the current benchmark rate, which is at a range of 2.25% to 2.50%, is too high for current economic conditions, and recommended lowering rates in order to stabilize the economy.

Is the USD about to roll over? Gold up, Oil down

Rally Mode Continues on EU Data and Fed Rate Cut Expectations

XAU/USD Fundamentals

Wednesday (June 5)

  • 8:15 US ADP Nonfarm Employment Change. Estimate 185K. Actual 27K
  • 9:45 US FOMC Member Clarida Speaks
  • 9:45 US Final Services PMI. Estimate 50.9
  • 10:00 US ISM Non-Manufacturing PMI. Estimate 55.6. Actual 56.9
  • 10:00 US FOMC Bowman Speaks
  • 10:30 US Crude Oil Inventories. Estimate -1.7M
  • 14:00 US Beige Book

Thursday (June 6)

  • 8:30 US Unemployment Claims. Estimate 215K

*All release times are DST

*Key events are in bold

XAU/USD for Wednesday, June 5, 2019

XAU/USD June 5 at 13:15 DST

Open: 1325.31 High: 1344.14 Low: 1324.63 Close: 1329.53

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1284 1306 1326 1344 1361 1375

XAU/USD was flat in the Asian session. The pair posted strong gains in European trade but has retracted in North American trade

  • 1326 is a weak support line
  • 1344 is the next resistance line
  • Current range: 1326 to 1344

Further levels in both directions:

  • Below: 1326, 1306, 1284 and 1261
  • Above: 1344, 1361 and 1375

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.