Gold struggles as global trade tensions escalate

Gold has posted considerable losses in the Wednesday session. In North American trade, the spot price for one ounce of gold is $1246.24, down 0.74% on the day. On the release front, inflation reports narrowly beat their estimates. Core PPI was unchanged at 0.3%, beating the forecast of 0.2%. PPI dropped from 0.5% to 0.3%, above the estimate of 0.2%. On Thursday, the U.S releases key consumer spending reports as well as unemployment claims.

The markets remain nervous about the worsening global trade war, particularly between the United States and China. After the two economic giants imposed tariffs on each other of some $30 billion, the Trump administration has raised the ante, threatening to hit China with further tariffs on $200 billion worth of Chinese goods. China cannot retaliate in kind, since it does not import that amount of goods from the U.S. Still, the Chinese can take steps which will make it more difficult for U.S companies to do business in China. President Trump’s presence at the NATO summit will not bolster investor confidence, as Trump has lashed out at Germany and other NATO members for not paying their fair share in defense spending.

Gold is sensitive to interest rate moves and investors and traders continue to look for clues about the Federal Reserve’s monetary plans. The Fed is expected to continue raising rates in the second half of 2018, but it remains unclear if the Fed will raise rates once or twice. The highly-anticipated FOMC minutes did not shed any light on this question and had little effect on gold prices. Fed policymakers remain bullish over the strong U.S economy, but remain concerned about developments abroad. These include growing trade tensions with U.S trading partners, as well as political and economic developments in Europe. The markets are circling the September policy meeting for the next rate hike, with the CME Group setting the odds of a quarter-point hike at 84%.

  Investors turn risk-averse on tariff war escalation

  ( Update 1) When the going gets tough, the tough get going

XAU/USD Fundamentals

  • 8:30 US Core PPI. Estimate 0.2%. Actual 0.3%
  • 8:30 US PPI. Estimate 0.2%. Actual 0.3%
  • 10:00 US Final Wholesale Inventories. Estimate 0.5%. Actual 0.6%
  • 10:30 US Crude Oil Inventories. Estimate -4.1M. Actual -12.6M
  • 12:30 US FOMC Member Rafael Bostic Speaks
  • 13:01 US 10-year Bond Auction
  • 16:30 US FOMC Member John Williams Speaks
  • 19:01 British RICS House Price Balance. Estimate -3%

Thursday (July 12)

  • 4:30 BoE Credit Conditions Survey
  • 8:30 US CPI. Estimate 0.2%
  • 8:30 US Core CPI. Estimate 0.2%
  • 8:30 US Unemployment Claims. Estimate 226K

*All release times are DST

*Key events are in bold

 

XAU/USD for Wednesday, July 11, 2018

XAU/USD July 11 at 12:25 DST

Open: 1255.71 High: 1256.99 Low: 1246.09 Close: 1246.24

 

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1204 1220 1236 1260 1285 1307

XAU/USD edged lower in the Asian session. The pair showed little movement in European trade and has posted losses in North American trade

  • 1236 is providing support
  • 1260 is the next resistance line
  • Current range: 1236 to 1260

Further levels in both directions:

  • Below: 1236, 1220, 1204
  • Above: 1260, 1285, 1307 and 1322

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