Gold Slide Continues as Trump favors Hawkish Taylor for Fed Chair

Gold is down considerably in Tuesday trade. In the North American session, the spot price for an ounce of gold is $1284.70, down 0.80% on the day. On the release front, there are no major releases out of the US for a second straight day. Import Prices gained 0.7%, beating the forecast of 0.6%.On Wednesday, the focus will be on housing data, with the release of Housing Starts and Building Permits.

Gold has lost ground this week, declining about 1.5 percent. The metal has been under pressure following reports that President Trump is leaning towards nominating economist John Taylor as the new head of the Federal Reserve. Taylor is considered more hawkish on policy than the current head, Janet Yellen, whose term expires in February 2018. A more hawkish Fed could be more inclined to raise interest rates early in 2018, despite weak inflation, which would strengthen the greenback against gold. Other candidates for the Fed Chair include current Fed Governor Jerome Powell and former Fed official Kevin Warsh.

Gold prices often move higher in response to geopolitical tensions, and the simmering dispute in Catalonia could be one such trouble spot. The constitutional conflict could worsen later this week, as the Spanish government seems intent on ending Catalonia’s bid for independence. Spanish Prime Minister Rajoy has insisted there will be no talks about independence with Catalan leaders, and has threatened to disband the Catalan parliament and impose direct rule from Madrid if Catalan President Carles Puigdemont does not recant his recent declaration of independence. The deepening crisis has led hundreds of companies to start leaving Catalonia, and the Standard and Poor’s rating agency has said that the region could face a recession if the situation is not resolved. Earlier this month, Spain’s economy minister said the uncertainty caused by the crisis had led to a freeze in investment projects in Catalonia. Investors are becoming more nervous about the crisis, and if the situation deteriorates, safe-haven gold could gain ground.

 

XAU/USD Fundamentals

Tuesday (October 17)

  • 8:30 US Import Prices. Estimate 0.6%. Actual 0.7%
  • 9:15 US Capacity Utilization Rate. Estimate 76.2%. Actual 76.0%
  • 9:15 US Industrial Production. Estimate 0.3%. Actual 0.3%
  • 10:00 US NAHB Housing Market Index. Estimate 64. Actual 68
  • 13:00 US FOMC Member Patrick Harker Speaks
  • Tentative – US Federal Budget Balance. Estimate -0.9B
  • 16:00 US TIC Long-Term Purchases. Estimate 14.3B

Wednesday (October 18)

  • 8:00 US FOMC Member William Dudley Speaks
  • 8:00 US FOMC Robert Kaplan Speaks
  • 8:30 US Building Permits. Estimate 1.25M
  • 8:30 US Housing Starts. Estimate 1.18M

*All release times are GMT

*Key events are in bold

 

XAU/USD for Tuesday, October 17, 2017

XAU/USD October 17 at 12:15 EST

Open: 1295.07 High: 1296.38 Low: 1281.42 Close: 1284.70

 

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1213 1240 1260 1285 1307 1337
  • XAU/USD posted small losses in the Asian and European sessions. The pair continues to lose ground in North American trade
  • 1285 is providing support
  • 1307 is a weak resistance line
  • Current range: 1285 to 1307

Further levels in both directions:

  • Below: 1260, 1240 and 1213
  • Above: 1285, 1307, 1337 and 1367

OANDA’s Open Positions Ratio

XAU/USD ratio is showing movement towards short positions. Currently, long positions have a majority (62%), indicative of trader bias towards XAU/USD reversing its current slide and moving to higher ground.

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