Gold slips on U.S. jobless claims, trade talk momentum

Gold has posted sharp losses in the Thursday session. In North American trade, the spot price for one ounce of gold is $1328.04, down 0.78% on the day. On the release front, U.S., durable goods orders improved to 1.2%, but fell short of the estimate of 1.6%. Core Durable Goods Orders rebounded with a gain of 0.1%, shy of the forecast of 0.3%. Unemployment claims dropped sharply to 216 thousand, a four-week low. However, the Philly Fed Manufacturing Index slipped to -4.1, its first decline since May 2016.

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The Federal Reserve minutes indicated that policymakers remain dovish with regard to monetary policy. Investors were not surprised, and gold was unable to make any headway. Participants reiterated that the Fed will remain cautious, stating that a “patient approach to monetary policy” was appropriate. However, members added that if economic projections improved, the Fed could revise the “patient approach”. The minutes noted that the employment market had strengthened and economic activity was rising, but expected GDP in 2019 to slow down compared to 2018. We may not see a rate hike before the second half of the year, as the Fed has scaled back its forecast to two hikes this  year, while the markets have priced in no rates hikes until 2020.  A dovish stance from the Fed is good news for gold, as a lack of rate hikes makes the dollar less attractive for investors.

Is a breakthrough imminent in U.S-China trade talks? The sides are holding a fourth round of talks in Washington this week. Talks are reportedly making substantial progress, as negotiators are preparing memorandums of understanding on key issues such as cyber theft and intellectual property rights. The trade war between the two largest economies in the world has triggered a slowdown in China and weighed on global stock markets. The U.S. has threatened to raise tariffs on March 1 if a deal is not reached, so there is strong pressure to reach a deal before the deadline. If the March 1 deadline is removed, traders can expect risk appetite to jump, which would lower investor appetite for safe-haven gold.

Fed tries to stay ahead of the (yield) curve

Aussie surges on strong jobs report

XAU/USD Fundamentals

Wednesday (February 20)

  • 14:00 US FOMC Meeting Minutes

Thursday (February 21)

  • 8:30 US Core Durable Goods Orders. Estimate 0.2%
  • 8:30 US Durable Goods Orders. Estimate 0.8%
  • 8:30 US Philly Fed Manufacturing Index. Estimate 15.6
  • 8:30 US Unemployment Claims. Estimate 220K

*All release times are EST

*Key events are in bold

XAU/USD for Thursday, February 21, 2019

XAU/USD February 21 at 12:40 EST

Open: 1338.54 High: 1341.57 Low: 1327.96 Close: 1328.04

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1284 1306 1326 1344 1365 1392

XAU/USD posted small gains in the Asian session but then reversed directions and headed lower in European trade. The pair has posted stronger losses in North American session

  • 1326 is providing support
  • 1344 is under pressure in resistance. It could break during the North American session
  • Current range: 1326 to 1344

Further levels in both directions:

  • Below: 1326, 1306, 1284 and 1261
  • Above: 1344, 1365 and 1392

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