Gold Drops as US Stock Markets Recover

Gold has posted strong losses in the Tuesday session. In North American trade, the spot price for an ounce of gold is $1328.04, down 0.86% on the day. On the release front, JOLTS Jobs Openings slowed to 5.81 million, well off the estimate of 5.95 million.

Gold prices moved higher on Monday, following a massive sell-off on global stock markets. A key factor in the stock market slide was strong employment numbers on Friday, as nonfarm payrolls and wage growth reports beat their estimates. Investors shied away from the stock markets, concerned that the sharp data could lead to higher inflation, which in turn would result in more rate hikes this year. Higher interest rates make the dollar more attractive for investors, at the expense of the stock markets. However, US stock markets are back in green territory on Tuesday, which has stemmed the gold rally.

The Janet Yellen era is over at the Federal Reserve. On the weekend, Jerome Powell took over as chair, replacing Yellen. On Friday, Yellen waxed optimistic about the economy, saying that strong growth, a red-hot labor market and increased wage growth would require the Fed to gradually raise interest rates. Powell is expected to continue to Yellen’s policies, so the markets are not expecting any dramatic shifts. However, the massive US tax cut will have a strong impact on the US economy, and the markets will be looking to the Fed for guidance. If the Fed sounds optimistic about the tax reform package, the US dollar could move higher.

XAU/USD Fundamentals

Tuesday (February 6)

  • 8:30 US Trade Balance. Estimate -52.1B. Actual -53.1B
  • 10:00 US JOLTS Jobs Openings. Estimate 5.95M
  • Tentative – US IBD/TIPP Economic Optimism. Estimate 55.4

*All release times are GMT

*Key events are in bold

XAU/USD for Tuesday, February 6, 2018

XAU/USD February 6 at 12:45 EST

Open: 1339.67 High: 1346.19 Low: 1326.33 Close: 1328.04

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1260 1285 1307 1337 1375 1416
  • XAU/USD edged higher in the Asian session. The pair then reversed directions and posted losses in European trade. The pair continues to lose ground in North American trade
  • 1307 is providing support
  • 1337 was tested in resistance and is a weak 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 little movement in the Tuesday session. Currently, short positions have a majority (62%), 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.