Gold ticked lower in the Tuesday session. In North American trade, the spot price for an ounce of gold was $1241.22, down 0.08% on the day. On the release front, PPI posted a gain of 0.4%, matching the estimate. Core PPI came in at 0.3%, above the estimate of 0.2%. On Wednesday, the Federal Reserve is expected to raise rates to a range between 1.25% to 1.50%. As well, the US releases CPI reports.
Traders should be prepared for a possible drop in gold prices on Wednesday, as the Federal Reserve meets to set the benchmark interest rate. The markets are expecting the Fed to raise rates by a quarter-point. Another rate hike is expected in January, with fed futures pricing a rate hike at 87%. The Fed is pleased with the strength of the US economy, but remains puzzled why strong growth and a red-hot labor market has not led to higher inflation. The labor market continues to operate at full capacity and various sectors in the economy are reporting a lack of workers. Still, this has not translated into stronger wage growth, despite predictions from Janet Yellen and other Fed policymakers that a lack of workers is bound to push up wages. On Friday, Average Hourly Earnings, which measures wage growth, came in at 0.2%, shy of the estimate of 0.3%. Whether inflation moves higher or remains depressed could have a significant effect on monetary policy – if wage growth and inflation show improvement in 2018, the Fed could raise interest rates up to three times in 2018. After Wednesday’s rate announcement, the markets will be looking ahead to the January policy meeting, with the odds of a quarter-point hike standing at 86 percent.
XAU/USD Fundamentals
Wednesday (December 13)
- 8:30 US CPI. Estimate 0.4%
- 8:30 US Core CPI. Estimate 0.2%
- 14:00 US FOMC Economic Projections
- 14:00 US FOMC Statement
- 14:00 US Federal Funds Rate. Estimate
- 14:00 US FOMC Press Conference
*All release times are GMT
*Key events are in bold
XAU/USD
XAU/USD December 12 at 12:25 EST
Open: 1242.20 High: 1246.27 Low: 1236.53 Close: 1241.22
XAU/USD Technicals
| S3 | S2 | S1 | R1 | R2 | R3 |
| 1188 | 1213 | 1240 | 1260 | 1285 | 1307 |
- XAU/USD posted small gains in the Asian session but retracted in European trade. The pair has been choppy in the North American session
- 1240 is providing support
- 1260 is the next resistance line
- Current range: 1240 to 1260
Further levels in both directions:
- Below: 1240, 1213 and 1188
- Above: 1260, 1285, 1307 and 1337
OANDA’s Open Positions Ratio
XAU/USD ratio is unchanged in the Tuesday session. Currently, long positions have a majority (74%), indicative of trader bias towards XAU/USD reversing directions and moving to higher ground.