Gold Shrugs off Mixed US Numbers
MarketPulse | Aug 19, 2014 11:02AM ET
Gold is steady on Tuesday, continuing the lack of movement which has characterized this week. The spot price stands at $1301.00 per ounce in the European session. On the release front, US data was mixed. CPI and Core CPI posted weak gains of 0.1%, while Building Permits and Housing Starts improved in July and beat their estimates.
Inflation numbers in the US remain at very low levels. On Tuesday, CPI and Core CPI, the primary gauges of consumer inflation, both posted paltry gains of 0.1%. These weak readings come on the heels of PPI, a manufacturing inflation index, which also came in at 0.1% last month. Weak inflation is one reason why the Federal Reserve is in no rush to raise interest rates, as low inflation points to slack in the economy.
On the employment front, last week's Unemployment Claims came in higher than expected. The indicator climbed to 311 thousand, marking a six-week high. The estimate stood at 307 thousand. Employment indicators are being closely scrutinized by analysts, as the strength of the labor market is one of the most important factors influencing the Federal Reserve regarding the timing of an interest rate hike. A rate increase is expected by mid-2015, but stronger economic data, especially on the employment front, could hasten a move by the Fed. Meanwhile, consumer confidence and retail sales disappointed last week. This means that an improvement in the US labor market has not translated into stronger consumer confidence and spending, which are critical for economic growth.
Financial leaders and central bankers from around the world will gather in Jackson Hole, Wyoming for a conference which starts on Friday. This will be Janet Yellen's first appearance as Fed chair at the conference, and will undoubtedly be the star of the show. Yellen is expected to discuss the employment market rather than monetary policy, but the markets will be listening closely for any hints as to an interest rate hike.
Hotspots in the Ukraine and the Middle East continue to garner market attention. In eastern Ukraine, more fighting has been reported between Ukrainian forces and pro-Russian separatists, and large numbers of Russian forces remain close to the border. In Iraq, Kurdish forces, aided by US air strikes, are battling with Islamic State militants. As political turmoil continues in Iraq, and the national government is becoming increasingly irrelevant. In Gaza, a ceasefire between Israel and Hamas is set to expire late Tuesday, with negotiations over a long-term agreement continuing in Egypt. Gold is sensitive to geopolitical developments, so the safe-haven metal could rise in price if nervous investors decide to dump their US dollars.
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- XAU/USD 1301.00 H: 1302.32 L: 1297.44
XAU/USD Technicals
| S3 | S2 | S1 | R1 | R2 | R3 |
| 1252 | 1275 | 1300 | 1315 | 1331 | 1345 |
- XAU/USD is showing little activity, as the pair continues to hug the 1300 line.
- 1315 remains an immediate resistance line. 1331 is stronger.
- On the downside, 1300 remains fluid. 1275 is next.
- Current range: 1300 to 1315.
Further levels in both directions:
- Below: 1300, 1275, 1252 and 1240
- Above: 1315, 1331, 1345 and 1361
OANDA's Open Positions Ratio
XAU/USD ratio is almost unchanged on Tuesday. This is consistent with the movement of the pair, as gold is almost unchanged. The ratio continues to have a substantial majority of long positions, indicative of trader bias towards gold breaking out and posting gains.
XAU/USD Fundamentals
- 12:30 US Building Permits. Estimate 1.00M. Actual 1.05M.
- 12:30 US CPI. Estimate 0.1%. Actual 0.1%.
- 12:30 US Core CPI. Estimate 0.2%. Actual 0.1%.
- 12:30 US Housing Starts. Estimate 0.97M. Actual 1.09M.
*Key releases are highlighted in bold
*All release times are GMT
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