Gold Improves to 10-Day High as Greenback Under Pressure

Gold has posted considerable gains at the start of the week. In Monday’s North American session, the spot price for an ounce of gold is $1262.63, up 0.60% on the day. On the release front, the sole US event, the NAHB Housing Market Index, improved to 74, beating the forecast of 70 points. On Tuesday, the key indicator is Building Permits. We’ll also get a look at Current Account and Housing Starts.

Gold prices remain high, but the metal could face some headwinds this week if Congress passes President Trump’s tax reform bill. If this happens, it would mark Trump’s first major legislative victory in office. Thanks to feverish efforts by Republican lawmakers, tax reform is quickly moving through Congress, with a final vote expected this week. The House and Senate have hammered out their differences, and the uniform bill, which must be approved in both houses, is expected to muster the necessary votes, even with all Democrat lawmakers expected to vote against the bill. Crucially, two Republican senators who were opposed to the bill have now lent their support to the bill. The legislation is the first major overhaul of the US tax code in 30 years, and is expected to strengthen the US economy.

The US economy continues to impress, but analysts remain stumped as to why strong growth and a red-hot labor market has not led to higher inflation. The labor market continues to operate at full capacity and various sectors in the economy are reporting a lack of workers. Still, this has not translated into stronger wage growth, despite predictions from Janet Yellen and other Fed policymakers that a lack of workers is bound to push up wages. The Fed appears ready to continue to jack up rates, despite the lack of inflation. The markets are preparing for another quarter-point increase next month, with the odds of a rate hike standing at 98%, according to the CME Group.

 

XAU/USD Fundamentals

Monday (December 18)

  • 10:00 US NAHB Housing Market Index. Estimate 70. Actual 74

Tuesday (December 19)

  • 8:30 US Building Permits. Estimate 1.28M
  • 8:30 US Current Account. Estimate -117B
  • 8:30 US Housing Starts. Estimate 1.25M
  • Tentative – US FOMC Member Neel Kashkari Speaks

*All release times are GMT

*Key events are in bold

 

XAU/USD for Monday, December 18, 2017

XAU/USD December 18 at 12:20 EST

Open: 1255.15 High: 1264.08 Low: 1252.87 Close: 1262.87

 

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1213 1240 1260 1285 1307 1337
  • XAU/USD showed limited movement in the Asian session. The pair posted small gains in European trade and continues to move higher in the North American session
  • 1260 has switched to a support role following gains by the pair in the Monday session. It is a weak line
  • 1285 is the next resistance line. This line has held firm since late November
  • Current range: 1260 to 1285

Further levels in both directions:

  • Below: 1260, 1240, 1213 and 1188
  • Above: 1285, 1307 and 1337

OANDA’s Open Positions Ratio

In the Monday session, XAU/USD ratio is showing long positions with a majority (76%). This is indicative of trader bias towards XAU/USD reversing directions and moving to higher ground.

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

Currency Analyst at Market Pulse
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.