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Upbeat Powell sends gold to 16-month low

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Gold has steadied in the Wednesday session after posting sharp losses on Tuesday. In North American trade, the spot price for one ounce of gold is $1226.78, down 0.08% on the day. On the release front, U.S housing numbers were softer than expected. Building Permits dropped to 1.27 million, shy of the estimate of 1.33 million. Housing Starts fell sharply to 1.17 million, down from 1.35 million. This was well below the estimate of 1.32 million. Federal Reserve Chair Jerome Powell is testifying before the House Financial Services Committee. On Thursday, the U.S releases Philly Fed Manufacturing Index and unemployment claims.

With the U.S economy performing well, there was no surprise that Fed Chair Jerome Powell sounded bullish on the U.S economy during testimony before the Senate Banking Committee on Tuesday. Powell said that he expected the labor market to remain tight and inflation to stay close to the Fed’s target of 2 percent for the next several years. Powell added that the Fed would continue to gradually raise interest rates. Lawmakers appeared satisfied with current monetary policy, but Powell did face some pointed questions regarding the escalating trade war, which has raised concerns that economy could take a downturn if the tariff battles continue. Still, consumer spending remains strong, the labor market is close to full capacity and inflation continues to move close to the Fed target of 2.0 percent. The Fed is widely expected to raise interest rates twice in the second half of the year, starting with a hike in September.

Goldilocks economy warrants a Goldilocks Federal Reserve chairperson.

XAU/USD Fundamentals

Tuesday (July 17)

  • 9:15 US Capacity Utilization Rate. Estimate 78.4%. Actual 78.0%
  • 9:15 US Industrial Production. Estimate 0.5%. Actual 0.6%
  • 10:00 US Federal Reserve Jerome Powell Testifies
  • 10:00 US NAHB Housing Market Index. Estimate 69. Actual 68
  • 16:00 US TIC Long-Term Purchases. Estimate 34.3B

Wednesday (July 18)

  • 8:30 US Building Permits. Estimate 1.33M
  • 8:30 US Housing Starts.  Estimate 1.32M
  • 10:00 US Federal Reserve Jerome Powell Testifies
  • 10:30 US Crude Oil Inventories
  • 14:00 US Beige Book

*All release times are DST

*Key events are in bold

XAU/USD for Wednesday, July 18 2018

XAU/USD July 18 at 12:30 DST

Open: 1227.80 High: 1229.22 Low: 1221.13 Close: 1226.88

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1170 1204 1220 1236 1260 1285

XAU/USD was flat in the Asian session. The pair edged lower in European trade but has recovered these losses in North American trade

  • 1220 is providing support
  • 1236 is the next resistance line
  • Current range: 1220 to 1236

Further levels in both directions:

  • Below: 1220, 1204 and 1170
  • Above: 1236, 1260, 1285, 1307 and 1322

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Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental and macroeconomic analysis, Kenny Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in major online financial publications including Investing.com, Seeking Alpha and FXStreet. Kenny has been a MarketPulse contributor since 2012.
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