Streaking Gold Kicks Off 2018 With Gains

It’s up, up, up for gold prices. The base metal has not had a losing session since December 19 and the upward movement has continued on Tuesday. In the North American session, the spot price for an ounce of gold is $ 1311.93, up 0.64% on the day. On the release front, today’s sole event was Final Manufacturing PMI, which climbed to 55.1, edging above the estimate of 55.0 points. This marked the highest level since March 2015. On Wednesday, the Federal Reserve will publish the minutes of its December meeting, and the US will release ISM Manufacturing PMI, a key manufacturing report.

Gold climbed 2.2% percent in December, and the upward trend has continued on Tuesday, with gold taking advantage of a broadly weaker US dollar. Gold has punched above $1310 earlier on Tuesday, for the first time since late September. With the US economy expanding above 3% and the Fed poised to raise rates for a second straight month, the gold rally has surprised many experts, as stronger economic conditions usually translate into stronger risk appetite, at the expense of gold prices. On Friday, the US releases wage growth and non-farm payrolls, and if the readings beat expectations, the dollar could recover some of its recent losses and send gold prices lower.

Gold Continues To Defy Sceptics

Traders can expect the Federal Reserve in the headlines a fair amount early in the New Year. Investors will be monitoring the Fed on Wednesday, with the release of the minutes of the December meeting. At that meeting, the Fed raised rates by 25 basis points, to a range between 1.25% and 1.50%. The hike marks a vote of confidence in the US economy, and if the minutes are hawkish, the US dollar could gain ground. If the US economy continues to expand at a clip exceeding 3%, the Fed is expected to raise rates up to four times in 2018. Currently, the CME Group has priced in a January rate hike at 98.5%. Although inflation remains well below the Fed target of 2.0%, outgoing Fed Chair Janet Yellen and other FOMC members have said that they expect that the strong labor market will lead to higher inflation. Although this is yet to materialize, of significance to the markets is the commitment of the Fed to press ahead with rate hikes, despite low inflation.

 

XAU/USD Fundamentals

Tuesday (January 2)

  • 9:45 US Final Manufacturing PMI. Estimate 55.0. Actual 55.1

Wednesday (January 3)

  • 10:00 US ISM Manufacturing PMI. Estimate 58.3
  • 14:00 US FOMC Meeting Minutes

*All release times are GMT

*Key events are in bold

 

XAU/USD for Tuesday, January 2, 2018

XAU/USD January 2 at 12:25 EST

Open: 1303.25 High: 1314.58 Low: 1302.90 Close: 1311.93

 

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1260 1285 1307 1337 1375 1416
  • XAU/USD posted slight gains in the Asian and European sessions. The pair is steady in North American trade
  • 1307 has switched to a support role following gains by the pair on Tuesday
  • 1337 is the next resistance line
  • Current range: 1307 to 1337

Further levels in both directions:

  • Below: 1307, 1285, 1260 and 1240
  • Above: 1337, 1375 and 1416

OANDA’s Open Positions Ratio

In the Tuesday session, XAU/USD ratio is showing long positions with a majority (54%). This is indicative of trader bias towards XAU/USD continuing to move 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.