Gold rally falters as trade tensions ease

After a sharp rally last week, gold prices have reversed directions on Monday. In the North American session, the spot price for one ounce of gold is $1327.70, down 0.95% on the day. On the release front, there are no major events. JOLTS Jobs Orders slowed to 7.45 million, shy of the estimate of 7.50 million. On Tuesday, the U.S. posts Producer Price Index reports.

Gold prices are sharply lower on Monday, as trade tensions have eased. Investors welcomed the news that the U.S. had suspended tariffs against Mexico, which were due to take effect today. High level talks between the sides on the illegal immigration have made enough progress to convince the U.S. administration to suspend the tariffs, at least for now. As well, G-20 finance ministers agreed on a joint communique to reduce trade tensions. With President Trump and President Xi of China meeting at the G-20 summit in Japan in late June, we could see progress in the bitter trade dispute between the world’s two largest economies.

The U.S. dollar was broadly lower last week, and gold took full advantage, gaining an outstanding 2.69%. The greenback declined on a combination of factors. Comments from Federal Reserve officials hinting at a rate cut sent the greenback lower. For most of the year, the Fed has sounded neutral about its next rate move, but last week’s U-turn was a dramatic development. 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 remarks echoed comments from 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. On Friday, nonfarm payrolls posted its second dismal reading in four months. In May, the economy created only 75 thousand jobs, down from 263 thousand a month earlier. Wage growth was unchanged at 0.2%, shy of the estimate of 0.3%. These weak figures unnerved investors, who snapped up safe-haven assets such as gold.

Stocks Rally on Positive Trade Developments

XAU/USD Fundamentals

Monday (June 10)

  • 10:00 US JOLTS Openings. Estimate 7.50M. Actual 7.45M

Tuesday (June 11)

  • 6:00 US NFIB Small Business Index. Estimate 102.3
  • 8:30 US Core PPI. Estimate 0.2%
  • 8:30 US PPI. Estimate 0.1%

*All release times are DST

*Key events are in bold

XAU/USD for Monday, June 10, 2019

XAU/USD June 10 at 13:20 DST

Open: 1340.44 High: 1340.44 Low: 1325.20 Close: 1327.70

XAU/USD Technical

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

XAU/USD posted sharp losses in the Asian session and further losses in European trade. The pair has reversed directions in  North American trade, edging upwards

  • 1326 is under strong pressure in support
  • 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.