Gold prices have moved higher on Monday. In the European session, the spot price is $1311.90, its highest level in three weeks. Gold has responded to increasing violence in Ukraine. In economic news, today's highlight is ISM Non-Manufacturing PMI. The markets are expecting the index to improve in the April reading.
Gold pushed back above the $1300 line as clashes continue between Ukrainian government forces and pro-Russian militants. There are casualties on both sides and the situation continues to deteriorate. The US has threatened Russia with further sanctions if Russia does not reign in the separatist forces. Meanwhile, Russia is maintaining a large military presence on its border with Ukraine, and the threat of a Russian invasion, which would rattle the markets, continues.
US employment releases looked excellent on Friday. Nonfarm Payrolls jumped to 288 thousand, easily beating the estimate of 216 thousand. The Unemployment Rate kept pace, dropping to 6.3%, its lowest level since September 2008. At the same time, the participation rate in the labor force dropped, so slack remains in the US job market, despite the strong releases in April.
As expected, the Federal Reserve trimmed its QE program by $10 billion on Wednesday. This marks the fourth cut since December, reducing the asset purchase scheme to $45 billion/month. The tapers are no longer creating headlines as they did just a few months ago, and the dollar didn't get any lift against its major rivals. What interested the markets more was the Fed statement that interest rates would remain low for a "considerable time" after QE ends. The markets expect QE to wind up before the end of the year, so we could see a rate hike in early 2015, depending of course, on the strength of the US economy and the job market.
- XAU/USD May 5 at 11:35 GMT
- XAU/USD 1311.90 H: 1314.92 L: 1314.92
XAU/USD Technicals
| S3 | S2 | S1 | R1 | R2 | R3 |
| 1260 | 1273 | 1300 | 1315 | 1330 | 1350 |
- XAU/USD has posted strong gains in Monday trade.
- 1300 has switched to a support role as gold has moved higher. This is followed by a support level at 1273.
- 1315 is the next line of resistance. It is a weak line and could see pressure during the day. There is stronger resistance at 1330.
- Current range: 1300 to 1315
Further levels in both directions:
- Below: 1300, 1273, 1260, 1252 and 1241
- Above: 1315, 1330, 1350 and 1388
OANDA's Open Positions Ratio
XAU/USD ratio is pointing to strong gains in short positions in Monday trade. This is not consistent with the pair's current movement, as gold has moved higher. The ratio has a substantial majority of long positions, reflecting a strong trader bias towards gold moving upwards.
Gold has moved higher as we start the week. XAU/USD is steady in the European session.
XAU/USD Fundamentals
- 13:45 US Final Services PMI. Estimate 54.2 points.
- 14:00 US ISM Non-Manufacturing PMI. Estimate 54.3 points.
- Tentative - US Loan Officer Survey.