Gold in Holding Pattern Ahead of Federal Reserve Minutes

Gold is steady in the Wednesday session, following sharp losses on Tuesday. In North American trade, the spot price for an ounce of gold is $1329.08, down 0.05% on the day. On the release front, all eyes are on the Federal Reserve, which will release the January minutes later in the day. Earlier, Existing Home Sales disappointed, dropping to 5.38 million. This was well short of the estimate of 5.61 million. On Thursday, the US will release unemployment claims.

Gold prices remain under pressure, as the metal has lost 1.5% this week, erasing much of last week’s gains. Concerns that strong US numbers could stoke inflation and more rate hikes sparked the recent turbulence in global stock markets. This has triggered volatility in gold, as gold prices are sensitive to moves (or expected moves) in interest rates. The Fed is currently projecting three rate hikes this year, but if inflation continues to move upwards, many analysts are expecting that the Fed could press the rate trigger four, or even five times in 2018. Traders should be prepared for some movement from gold later in the North American session, as the minutes could provide some clues regarding future rate policy.

It’s been a busy start for Jerome Powell, who has just commenced his stint as chair of the Federal Reserve. Strong US data in recent weeks has raised speculation that the Fed may need to accelerate the pace of interest rate hikes in 2018.  Meanwhile, concern over higher inflation and more rate hikes sent the stock markets into a frenzy earlier in February. Powell sought to reassure the markets that the Fed was monitoring the situation, but it’s doubtful that the Fed can do much to prevent volatility in the markets.

XAU/USD Fundamentals

Wednesday (February 21)

  • 9:45 US Flash Manufacturing PMI. Estimate 55.4. Actual 55.9
  • 9:45 US Flash Services PMI. Estimate 53.8. Actual 55.9
  • 10:00 US Existing Home Sales. Estimate 5.61M. Actual 5.38M
  • 14:00 US FOMC Meeting Minutes

Thursday (February 22)

  • 8:30 US Unemployment Claims. Estimate 230K

*All release times are GMT

*Key events are in bold

XAU/USD for Wednesday, February 21, 2018

XAU/USD February 21 at 12:35 EST

Open: 1329.66 High: 1333.04 Low: 1325.27 Close: 1329.08

 

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1260 1285 1307 1337 1375 1416
  • XAU/USD posted losses in the Asian and European sessions. The pair continues to lose ground in North American trade
  • 1307 is providing support
  • 1337 has switched to a resistance role following losses from XAU/USD on Tuesday
  • 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 slight movement towards short positions. Currently, short positions have a majority (60%), indicative of trader bias towards XAU/USD breaking out and moving 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.