Gold Dips to 2-Month Low But Recovers

Gold prices dropped considerably on Thursday before recovering. In North American trade, the spot price for an ounce of gold is $1319.57, up 0.10% on the day. On the release front, there was excellent news on the employment front, as unemployment claims dropped to 221 thousand, well below the estimate of 232 thousand.

The US labor market remains strong, so much so that January’s nonfarm payrolls and wage growth reports triggered the strong slide on global stock markets this week. Unemployment claims sparkled on Thursday, dropping to 221 thousand. The 4-week moving average dropped to 224,500, its lowest level since 1973. Although unemployment remains at record-low levels, the lack of slack in the labor market has not led to strong wage growth, and inflation remains below the Fed target of 2 percent. One of the priorities for the new chair of the Federal Reserve, Jerome Powell, will be to examine what steps can be taken to raise inflation, which has not kept up with robust economic growth.

Powell was probably hoping for a quiet start at his new job as chair of the Federal Reserve, but the stock markets had other plans. Powell, who took over on Saturday, was greeted by the largest one-day drop ever on the Dow Jones on Monday, as US stock markets nosedived. Some analysts went as far as attributing some of the losses on the changing of the guard at the Fed, but this appears unlikely, given that Powell is expected to follow Janet Yellen’s policies. This sentiment was echoed by on Tuesday by St. Louis Federal Reserve President James Bullard, who said that he does not think that policy will change appreciably under Powell. A more plausible explanation for the massive sell-off earlier this week was investor concern of faster rate hikes by the Federal Reserve if inflation moves higher. Higher interest rates would make the dollar more attractive and weigh on gold prices. The Fed expects to raise rates three times in 2018, but could make four moves if the economy remains strong and inflation improves.

XAU/USD Fundamentals

Thursday (February 8)

  • 8:30 US Unemployment Claims. Estimate 232K. Actual 221K
  • 10:00 US Mortgage Delinquencies. Actual 5.17%
  • 10:30 US Natural Gas Storage. Estimate -116B. Actual -119B
  • 13:01 US 30-year Bond Auction

*All release times are EST

*Key events are in bold

XAU/USD for Thursday, February 8, 2018

XAU/USD February 8 at 12:55 EST

Open: 1318.47 High: 1332.33 Low: 1307.08 Close: 1319.57

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1260 1285 1307 1337 1375 1416
  • XAU/USD posted gains in the Asian session but gave up these gains in European trade. The pair continues to lose ground in North American trade
  • 1307 is providing support
  • 1337 is the next resistance line
  • Current range: 1307 to 1337

Further levels in both directions:

  • Below: 1307, 1285 and 1260
  • Above: 1337, 1375, 1416 and 1433

OANDA’s Open Positions Ratio

XAU/USD ratio is showing gains in long positions in the Thursday session. Currently, short positions have a majority (57%), indicative of trader bias towards XAU/USD continuing to move lower.

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

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, Seeking Alpha and FXStreet. Kenny has been a MarketPulse contributor since 2012.