By Kenny Fisher
Gold has steadied on Friday, following sharp gains a day earlier, as the metal barreled above the $1,300 level. In Friday's European session, the spot price stands at $1,308.20 per ounce. On Thursday, there was good news on the release front, as U.S. Unemployment Claims and the Philly Fed Manufacturing Index beat their estimates.
There was positive economic news out of the U.S. on Thursday, as Unemployment Claims dipped to 312 thousand last week, beating the estimate of 316 thousand. As well, the Philly Fed Manufacturing Index, which has been on the upswing for most of 2014, continued the trend and improved to 17.8 points, crushing the estimate of 14.3. This was the index's strongest reading since last August, and points to a manufacturing sector which is expanding in order to keep up with increasing demand.
The Federal Reserve continued to trim its QE program on Wednesday, reducing the scheme by $10 billion, to $35 billion/month. If all goes as planned, the Fed could wind up QE in the fall. The Fed also hinted that interest rates will continue to stay low for the foreseeable future, which likely means that we won't see any rate hikes before the first quarter of 2015. With regard to economic activity, the Fed noted that the recovery is continuing, but it reduced its forecast of economic growth to 2.1%-2.3%, down from an earlier forecast of around 2.9 percent. The bottom line? There were no dramatic items in the Fed statement, with one analyst describing current Fed policy as "steady as she goes." The market perception that U.S. interest rates will remain low was good news for gold, which jumped about 2.8% on Thursday.
In Iraq, the situation remains volatile, as militants linked to al-Qaeda continue to push back government troops and have overrun the north of the country. The insurgents are only about 60 kilometers from the capital of Baghdad, and the situation has quickly escalated into a major crisis for both the Iraqi and US governments. Gold prices have jumped this week, as the metal is considered a hedge during periods of geopolitical instability. We could see gold prices climb even higher if the situation continues to deteriorate.
XAU/USD for Friday, June 20, 2014
XAU/USD June 20 at 9:25 GMT
XAU/USD 1308.20 H: 1316.96 L: 1306.50
- Gold prices have edged lower on Friday, as the pair remains above the 1300 level.
- 1300 has reverted to a support role as XAU/USD continues to move higher. This is followed by a support level at 1275.
- 1315 is the next resistance line, and saw action earlier in the day. This is followed by resistance of 1331, which has remained intact since late March.
- Current range: 1300 to 1315.
Further levels in both directions:
- Below: 1300, 1275, 1260 and 1250
- Above: 1315, 1331, 1354 and 1375
OANDA's Open Positions Ratio
XAU/USD ratio has posted strong gains in short positions. This is due to the strong gain in gold prices, which has led to numerous long positions being covered, resulting in a larger percentage of open short positions. The ratio is made up of a majority of long positions, reflecting trader bias towards gold prices continuing to move higher.
Gold has posted slight losses on Friday. XAU/USD is almost unchanged in the European session.
- There are no U.S. releases on Friday.