Gold Steadies After Sharp Losses, Markets Await Yellen Testimony

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 |  Includes: FXE, GLD, UDN, UUP
by: Dean Popplewell

By Kenny Fisher

Gold prices have steadied on Tuesday, as the spot price stands at $1309.23 per ounce late in the European session. Gold slipped about 2% on Monday, as the pair fell close to the $1300 level. On the release front, Monday's highlights are Core Retail Sales and Retail Sales. As well, Federal Reserve chair Janet Yellen will begin two days of testimony on Capitol Hill.

Janet Yellen visits Capitol Hill this week, starting with testimony on Tuesday before the Senate Banking Committee. The Federal Reserve minutes, released last week, did not shed much light on when the Fed plans to raise interest rates, but policymakers did agree to wind up the QE scheme by October. The asset purchase program flooded the economy with over $2 trillion, and the Fed has been steadily reducing the program since last December. Winding down QE, which currently stands at $45 billion/month, will require several more tapers by the Fed, but that shouldn't pose a problem, as the US economy continues to improve. The markets will be closely following Yellen's remarks, looking for clues regarding the timing of a rate hike.

The ECB had hoped that its rate cutting in June would inject some life into growth and inflation levels. So far, the results have been less than impressive, as inflation and manufacturing numbers in Germany and France, the two largest economies in the eurozone, remain at very low levels. A strong euro has not helped matters, as it makes European exports more expensive and weighs on growth. If the trend of weak figures continues, the ECB will face more pressure to take action at its next policy meeting.

XAU/USD for Monday, July 15, 2014

XAU/USD July 15 at 11:50 GMT

XAU/USD 1309.23 H: 1338.93 L: 1303.28

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1252 1275 1300 1315 1331 1354
Click to enlarge
  • XAU/USD lost ground in the Asian session and this continued until early in the European session, before the pair steadied close to the 1320 level.
  • 1315 has reverted to a resistance role and is a weak line. 1331 is stronger.
  • 1300 is a providing support. 1275 is next.
  • Current range: 1300 to 1315.

Further levels in both directions:

  • Below: 1300, 1275, 1252 and 1231
  • Above: 1315, 1331, 1354 and 1375

OANDA's Open Positions Ratio

XAU/USD ratio is pointing to sharp gains in long positions on Tuesday. With gold posting sharp losses at the start of the week, numerous short positions were covered, resulting in a larger percentage of open long positions. The ratio currently has a strong majority of long positions, indicative of strong trader bias towards gold reversing directions and moving higher.

XAU/USD Fundamentals

  • 9:00 German ZEW Economic Sentiment. Estimate 28.9 points. Actual 27.1 points.
  • 9:00 European ZEW Economic Sentiment. Estimate 62.3 points. Actual 48.1 points.
  • 12:30 US Core Retail Sales. Estimate 0.5%.
  • 12:30 US Retail Sales. Estimate 0.6%.
  • 12:30 US Empire State Manufacturing Index. Estimate 17.2 points.
  • 12:30 US Import Prices. Estimate 0.5%.
  • 14:00 US Federal Reserve Chair Janet Yellen Testifies Before Senate Banking Committee.
  • 14:00 US Business Inventories. Estimate 0.6%.

*Key releases are highlighted in bold

*All release times are GMT

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.