Gold Edges Lower, Markets Await US Job Numbers

Gold is showing little movement on Wednesday, trading at a spot price of $1210.60 an ounce in the North American session. In economic news, today’s key event was ISM Manufacturing PMI. The index improved to 51.3 points, beating the estimate of 50.5 points. On Thursday, the US will release two major employment releases, ADP Nonfarm Payrolls and Unemployment Claims.

Gold prices are sensitive to interest rate levels, so renewed speculation about a rate hike by the Federal Reserve continues to weigh on gold prices. Earlier in the week, gold dipped below the symbolic $1200 line, its lowest level since mid-February. Only a few weeks ago, a rate hike in the US was considered very unlikely. However, recent comments by Federal Reserve chair Janet Yellen and other Fed policymakers have strongly hinted that a rate hike is on the table this summer. On Friday, Yellen said that if the US economy continued to improve, a rate hike would be appropriate in the “coming months”. This was followed by St. Louis Reserve President James Bullard, who said on Monday that global markets were “well prepared” for a summer interest rate rise, although he didn’t provide any specific dates. Odds of a rate hike in June have increased, but the Fed will be hard-pressed to raise rates if key indicators don’t show improvement, particularly inflation numbers. According to CME Group, traders have priced in a June rate hike at 28%, 60% for July and 68% in September. Market sentiment has strongly shifted towards the Fed raising rates, and this could boost the US dollar against its rivals.

OPEC members will gather in Vienna on Thursday, but analysts are not expecting OPEC to reach an agreement on a production cap or new targets, given the deep animosity between Saudi Arabia and Iran. Iran has refused to agree on an output policy in recent years, preventing members from reaching an agreement to lower or freeze production in order to boost low oil prices. Iran reiterated its policy on Wednesday, saying it would not sign off on any commitment regarding output levels. The current situation has allowed OPEC countries to pump at will, as members have adopted a mantra of “every man for himself”, jockeying for a larger piece of the oil market pie. If, against all expectations, OPEC does hammer out an agreement, we could see some volatility in the commodity markets.

XAU/USD Fundamentals

Wednesday (June 1)

  • 9:45 US Final Manufacturing PMI. Estimate 50.5. Actual 50.7
  • 10:00 US ISM Manufacturing PMI. Estimate 50.5. Actual 51.3
  • 10:00 US Construction Spending. Estimate 0.5%. Actual -1.8%
  • 10:00 US ISM Manufacturing Prices. Estimate 58.0. Actual 63.5
  • All Day – US Total Vehicle Sales. Estimate 17.2M
  • 14:00 US Beige Book

Upcoming Key Events

Thursday (June 2)

  • All Day – OPEC Meetings
  • 8:15 US ADP Nonfarm Employment Change. Estimate 177K
  • 8:30 US Unemployment Claims. Estimate 270K
  • 11:00 US Crude Oil Inventories

*Key releases are highlighted in bold

*All release times are EDT

XAU/USD for Wednesday, June 1, 2016

XAU/USD June 1 at 11:35 EDT

Open: 1216.67 Low: 1208.60 High: 1220.47 Close: 1210.60

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1164 1191 1207 1232 1255 1279
  • XAU/USD showed limited movement in the Asian and European sessions. The pair has lost ground in North American trade
  • 1207 is a weak support line. It could see further action in the North American session
  • 1232 is a strong resistance line
  • Current range: 1207 to 1232

Further levels in both directions:

  • Below: 1207, 1191, 1164 and 1130
  • Above: 1232, 1255 and 1279

OANDA’s Open Positions Ratio

XAU/USD ratio is almost unchanged on Wednesday, consistent with the lack of significant movement from XAU/USD. Long positions maintain a strong majority (69%), indicative of trader bias towards XAU/USD reversing directions and moving to higher levels.

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.