Gold has ticked lower on Wednesday, as the metal trades at $ 1345.59 in the North American session. On the release front, the Federal Reserve will release the minutes of its July policy meeting. We’ll also hear from FOMC member James Bullard, who will speak at an event in St. Louis. On Thursday, the US will release two key events – Philly Fed Manufacturing Index and Unemployment Claims.
Gold prices are sensitive to interest rate movements, so any hints in the Federal Reserve minutes about the possibility of a rate hike could push gold prices lower. However, the minutes could prove to be a non-event, since there have been a host of key releases since the July meeting. Problem is, the data is pointing in all directions, making it a tricky task to try and figure out when the Fed might raise interest rates. After a soft GDP report in late July, nonfarm payrolls put in a stellar performance. However, this was followed by weak retail sales and CPI numbers. Bottom line? A September hike is virtually off the table, while the odds of a December hike are pegged at 50/50. However, Fed policymakers will be hesitant to raise rates if key indicators, particularly inflation levels, remain close to zero.
US inflation numbers remain mired at low levels, a persistent sore point in a generally strong US economy. The lack of inflation was underscored on Tuesday by consumer inflation reports for July. CPI posted a weak reading of 0.0%, its worst showing in five months. Core CPI dropped to 0.1%, shy of the estimate of 0.2%. The Fed has stubbornly stuck to the script that inflation levels should move higher, but there hasn’t been any movement in this direction and the Fed’s inflation target of 2.0% seems little more than wishful thinking at this point in time.
Wednesday (August 17)
- 10:30 US Crude Oil Inventories. Estimate 0.3M. Actual -2.5M
- 13:00 FOMC Member James Bullard Speaks
- 14:00 US FOMC Meeting Minutes
Thursday (August 18)
- 8:30 US Philly Fed Manufacturing Index. Estimate 1.4
- 8:30 US Unemployment Claims. Estimate 269K
*Key releases are highlighted in bold
*All release times are EDT
- XAU/USD has shown limited movement in the Wednesday session
- There is resistance at 1361
- 1331 is providing support
- Current range: 1331 to 1361
Further levels in both directions:
- Below: 1331, 1307 and 1279
- Above: 1361, 1388, 1416 and 1447
OANDA’s Open Positions Ratio
XAU/USD ratio is showing slight movement towards long positions. Currently, long positions command a strong majority (65%), indicative of trader bias towards XAU/USD breaking out and moving upwards.
About Kenny Fisher
Currency Analyst, OANDA, Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years. Follow on and on his Google+ profile.