Gold Under Pressure at Start of Week

Gold has posted losses on Monday, continuing the downward movement we saw late last week. In the European session, the spot price stands at $1211.19.  In the US, there are no major events to start off the week, but the markets will be keeping an eye on manufacturing numbers, with the release of the Empire State Manufacturing Index and Industrial Production. Both indicators are expected to improve, which could give the US dollar a boost.

The US ended the week with mixed news, as inflation dipped while consumer confidence jumped. The Producer Price Index, the primary gauge of manufacturing inflation, dropped by 0.2%, its worst showing in six months. The estimate stood at -0.1%.  Meanwhile, UoM Consumer Sentiment moved higher for a fourth straight month, pointing to increased optimism among US consumers. The key indicator soared to 93.8 points, its highest level since January 2007 and well above the forecast of 89.6 points. On Friday, there was good news from retail sales and jobless claims. Core Retail Sales came in at 0.5%, ahead of the estimate of 0.1%. Not to be undone, Retail Sales posted a gain of 0.7%, beating the estimate of 0.4%. This was the indicator’s strongest showing in 12 months. There was more good news on the job front, as Unemployment Claims dipped to 294 thousand, below the forecast of 299 thousand.

The euro showed little response to the ECB’s second TLTRO (Targeted Long Term Refinancing Option) on Thursday. This lending program aims to bolster the economy by increasing bank lending to the real economy. The auction saw European banks take loans of about EUR 130 billion. Although this was higher than the September auction, which had a take-up of EUR 82 billion, the total of around 212 billion was only half of the ECB target of 400 billion. The disappointing figure means that the ECB remains under strong pressure to introduce QE early in 2015, which would likely push the euro to further lows. Meanwhile, the Eurozone continues to struggle with low inflation levels, with a senior ECB official warning of deflation dangers. Speaking in Washington on Tuesday, ECB board member Peter Praet said that falling oil prices could push Eurozone inflation into negative territory.

XAU/USD for Monday, December 15, 2014

XAU/USD December 15 at 11:30 GMT

XAU/USD 1211.19 H: 1224.14 L: 1209.68

XAU/USD Technical

• XAU/USD has shown little movement in the Asian and European sessions.
• On the upside, 1215 was tested in the Asian session and remains under pressure. 1240 is stronger.
• The round number of 1200 is an immediate support line.
• Current range: 1200 to 1215

Further levels in both directions:

• Below: 1200, 1175, 1156 and 1130
• Above: 1215, 1240, 1255, 1275 and 1290

OANDA’s Open Positions Ratio

XAU/USD ratio is pointing to gains in long positions on Monday. This is not consistent with the pair’s movement, as gold has posted losses. The ratio has a majority of long positions, indicative of trader bias towards gold reversing directions and moving to higher ground.

XAU/USD Fundamentals

• 13:30 US Empire State Manufacturing Index. Estimate 12.1 points.
• 14:15 US Capacity Utilization Rate. Estimate 79.4%.
• 14:15 US Industrial Production. Estimate 0.8%.
• 15:00 US NAHB Housing Market Index. Estimate 59 points.
• 21:00 US TIC Long-Term Purchases. Estimate 72.8B.

*Key releases are highlighted in bold

*All release times are GMT

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.