Gold has posted strong gains in the Thursday session, after trading sideways on Wednesday. In North American trade, the spot price for an ounce of gold is $1313.89, up 0.69% on the day. On the release front, unemployment claims edged up to 211 thousand, easily beating the estimate of 225 thousand. In the services sector, ISM Non-Manufacturing PMI dropped for a third straight month, coming in at 56.8 points, above the estimate of 56.1 points. On Friday, the US releases three employment indicators – wage growth, nonfarm payrolls and the unemployment rate.
As expected, the Federal Reserve maintained the benchmark rate at a target of 1.5% to 1.75% on Wednesday. The rate statement was significant, with policymakers noting that “overall inflation has moved closer to 2 percent”. This was more hawkish than the March statement, which said that inflation indicators “have continued to run below 2 percent”. With inflation moving closer to the Fed target of 2 percent, there is a stronger likelihood that the Fed will upgrade its rate projection from three to four hikes in 2018. The odds of a fourth rate hike this year stand at 50%. The Fed rate statement also noted that “market-based measures of inflation compensation remain low”, a reference to soft wage growth, which is at 2.7%, lower than the 3% rate that the Fed would like to see.
The US has sent a trade delegation to China to discuss recent tensions in relations between the two countries over tit-for-tat tariffs. However, the markets are not expecting any breakthrough, as the delegation will be in China for only a few days. China and the US have engaged in a nasty trade battle, imposing stiff tariffs on a wide range of products. If the two sides do not display some flexibility and goodwill, there are fears that the tariffs could lead to a global recession. A trade war between the world’s largest two economies would be a lose-lose for both China and Beijing, but would be a boon for gold, which is a traditional safe-haven asset in times of trouble.
Thursday (May 3)
- 7:30 US Challenger Job Cuts. Actual -1.4%
- 8:30 US Preliminary Nonfarm Productivity. Estimate 0.9%. Actual 0.7%
- 8:30 US Preliminary Unit Labor Costs. Estimate 3.1%. Actual 2.7%
- 8:30 US Trade Balance. Estimate -50.0B. Actual -49.0B
- 8:30 US Unemployment Claims. Estimate 225K. Actual 211K
- 9:45 US Final Services PMI. Estimate 54.4. Actual 54.6
- 10:00 US ISM Non-Manufacturing PMI. Estimate 58.1. Actual 56.8
- 10:00 US Factory Orders. Estimate 1.3%. Actual 1.6%
- 10:30 US Natural Gas Storage. Estimate 47B. Actual 62B
Friday (May 4)
- 8:30 US Average Hourly Earnings. Estimate 0.2%
- 8:30 US Nonfarm Employment Change. Estimate 189K
- 8:30 US Unemployment Rate. Estimate 4.0%
*All release times are DST
*Key events are in bold
XAU/USD for Thursday, May 3, 2018
XAU/USD May 3 at 11:55 DST
Open: 1304.86 High: 1318.18 Low: 1304.66 Close: 1313.89
- XAU/USD showed little movement in the Asian session. The pair posted considerable gains in European trade but has given up much of those gains in North American trade
- 1307 is providing support
- 1337 is the next resistance
- Current range: 1307 to 1337
Further levels in both directions:
- Below: 1307, 1285, 1260 and 1236
- Above: 1337, 1375 and 1416
OANDA’s Open Positions Ratio
XAU/USD ratio is showing little movement in the Thursday session. Currently, long positions have a majority (70%), indicative of trader bias towards XAU/USD continuing to move upwards.