Gold Rises as Markets Digest Dovish Fed Minutes

Gold has posted gains on Thursday, reversing the downward movement which marked the Wednesday session. In the North American session, gold is trading at a spot price of $1238.03 an ounce. On the release front, US Unemployment Claims dropped to 267 thousand, below the estimate. Later in the day, Fed chair Janet Yellen will deliver remarks in New York City.

The US labor market continues to look robust, as Unemployment Claims dipped to 267 thousand, below the estimate of 271 thousand. Last week’s job numbers, were solid as well. Nonfarm Payrolls, the most important employment indicator, came in at 215 thousand in March, above the forecast of 206 thousand. Weekly unemployment rolls have remained below the 300,000 level for 57 weeks, the longest streak since 1973. A steady rise in hiring has translated into stronger consumer spending and a shot in arm for the US economy.

The highly-anticipated Federal Reserve minutes were dovish, boosting gold prices on Thursday. The minutes indicated that the Fed is unlikely to raise rates before June at the earliest. Although some policymakers expressed approval for a rate hike in April, others expressed concern about the risks to the US economy posed by global economic conditions. There was a split amongst members as to whether the recent pickup in inflation was sustainable. Many Fed members were worried about the lack of options available to the Fed since rates remain close to zero. This concern can have significant impact on the currency markets, since the dollar could strengthen if the Fed is unable to implement effective easing measures. The minutes appear to be a validation of Janet Yellen’s remarks last week, which were very dovish and dampened growing enthusiasm about a rate hike as early as April. So what can we expect from the Fed? There is a strong likelihood that the Fed will raise rates twice in 2016, but the timetable of any moves is unclear. Yellen speaks later on Thursday in New York, and the markets will be carefully monitoring her comments, looking for clues as to the Fed’s rate plans.

XAU/USD Fundamentals

Thursday (April 7)

  • 8:30 US Unemployment Claims. Estimate 271K. Actual 267K
  • 10:30 US Natural Gas Storage. Estimate 7B. Actual 12B
  • 15:00 US Consumer Credit. Estimate 15.0B
  • 17:30 US Fed Chair Janet Yellen Speaks
  • 16:15 FOMC Member Esther George Speaks

*Key releases are highlighted in bold

*All release times are DST

XAU/USD for Thursday, April 7, 2016

XAU/USD April 7 at 12:40 DST

Open: 1225.23 Low: 1223.57 High: 1243.28 Close: 1238.03

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1191 1205 1232 1255 1279 1303
  • XAU/USD showed limited movement in the Asian session. The pair posted strong gains in the European session and continues to post gain in North American trade
  • 1232 has switched to a support role following gains by XAU/USD on Thursday
  • There is resistance at 1255
  • Current range: 1232 to 1255

Further levels in both directions:

  • Below: 1232, 1205, 1191 and 1169
  • Above: 1255, 1279 and 1303

OANDA’s Open Positions Ratio

XAU/USD ratio has shown slight movement towards short positions on Thursday. Long positions have a strong majority (58%), indicative of trader bias towards gold continuing to move higher.

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.