Gold drifting as investors eye Powell testimony

Gold continues to have a quiet week. In Tuesday’s North American session, the spot price for one ounce of gold is $1327.53, down 0.04% on the day. In economic news, construction numbers were a mix. Building permits stayed steady at 1.33 million, while housing starts fell to 1.08 million, marking a two-year low. CB Consumer Confidence sparkled, with a score of 131.4, well above expectations. As well, the Richmond Manufacturing Index jumped to 16 points, a 5-month gain. All eyes are on Fed Chair Jerome Powell, who is testifying before the Senate Banking Committee. On Wednesday, Powell speaks before the House Financial Services Committee.

Risk appetite has improved as U.S-China trade tensions have eased, but the end result of feverish negotations remains unclear. This has left investors in a pensive mood on Wednesday as stock markets and gold prices are showing little movement. President Trump had said that he would raise tariffs on Chinese goods from 10% to 25% on March 1, but hinted last week that the deadline was flexible. On Sunday, Trump tweeted that he was waiving the deadline, since the parties had made “significant progress”. Trump added that he was open to meeting with Chinese President Xi, if there was further progress. Although there is optimism that the sides will reach an agreement, there is some anxiety over the lack of any details about what a possible deal will look like. The U.S. has presented a wide range of demands, but it’s unclear what the Chinese will agree to and how any agreement will be enforced. Will the current set of tariffs be completely removed if a deal is reached? If not, market enthusiasm could evaporate, as the tariffs have caused enormous turmoil in international trade and dampened global growth. If an agreement is reached, risk appetite could jump and send gold prices lower.

The Federal Reserve is back in the spotlight this week, as Fed Chair Jerome Powell testifies before congressional committees on Tuesday and Wednesday. The Fed has been decidedly dovish early in 2019, in sharp contrast to 2018, when the Fed raised rates four times in order to keep the red-hot U.S. economy from overheating. However, the global trade war has taken a bite out of global growth, and the U.S. economy is unlikely to repeat last year’s performance. The markets will be listening closely for hints regarding future interest rate policy.

Markets consolidate as Trump tweets oil

Powell sticks to the script in his text release

XAU/USD Fundamentals

Tuesday (February 26)

• 8:30 US Building Permits. Estimate 1.29M. Actual 1.33M
• 8:30 US Housing Starts. Estimate 1.25M. Actual 1.08M
• 9:00 US HPI. Estimate 0.3%. Actual 0.3%
• 9:00 US S&P/CS Composite-20 HPI. Estimate 4.5%. Actual 4.2%
• 9:45 Fed Chair Powell Testifies
• 10:00 US CB Consumer Confidence. Estimate 124.8. Actual 131.4
  
• 10:00 US Richmond Manufacturing Index. Estimate 6. Actual 16

Wednesday (February 27)

• 10:00 Fed Chair Powell Testifies

*All release times are EST

*Key events are in bold

XAU/USD for Tuesday, February 26, 2019

XAU/USD February 26 at 12:45 EST

Open: 1327.54 High: 1330.25 Low: 1323.58 Close: 1327.53

XAU/USD Technical

XAU/USD ticked higher in the Asian session. The pair edged lower in European trade but has rebounded in North American trade

• 1326 is under pressure in support and could break in North American trade
• 1344 is the next resistance line
• Current range: 1326 to 1344
  

Further levels in both directions:

• Below: 1326, 1306, 1284 and 1261
• Above: 1344, 1365 and 1392

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