Gold spot price sluggish ahead of ECB meeting and US unemployment data

on Nov 5, 2013
Listen Tuesday, November 5th:_ The XAU/USD yesterday opened at 1313.89 and closed at 1314.99, gaining 0.11 percent. The pairing initially rose to a high at 1322.47, testing the 1321.70 resistance, but failed to trade for long above that level and fell to a low at 1311.04. The price action formed a doji candle, indicating indecision in the market.

Since yesterday, the 4H 200-period simple moving average has been offering resistance and the price has been unable to close above this trend indicator. Today the quote initially rose to what remains an intraday high at 1319.93 but subsequently dropped to the day’s ongoing low at 1309.27. Right now, spot gold is trading at 1315.75.
The XAU/USD continues to be driven by a strengthening US dollar and renewed speculation on the US Fed’s tapering timetable and the prospects of further easing by the ECB.

Two FOMC members yesterday talked about US-style quantitative easing and the economy. Fed governor Jerome Powell said that the central bank is likely to keep its policy unchanged for some time, and that it was unclear when any scale back in the $85 billion per month bond-buying programme will begin. Boston Fed president Eric Rosengren stated that there was more to be done if the labour market was to gain strength. The year’s next and final FOMC meeting is scheduled for 17 and 18 December.

Robin Bhar, an analyst at Societe Generale SA in London, told Bloomberg today: “The dollar has strengthened and is capping and pushing gold lower. We probably need gold below $1,300 an ounce to really stir up any more physical interest.”
The prices of goods leaving Eurozone factories in September fell by their fastest annualised rate in the past three and a half years. The slump strengthened fears that too-low inflation could threaten the fragile recovery both in Europe and globally. While producer prices rose by 0.1 percent in September, annually producer prices were down 0.9 percent. This is the biggest rate of y/y decline since January 2010.

Data from last week showed that consumer prices have increased by only 0.7 percent in the 12 months to October, remaining far from the European Central Bank’s objective of price stability at a two percent rate of inflation. The unexpectedly low reading has fuelled expectations that the ECB will be obliged to soon cut interest rates from the current record low level of 0.50 percent. Most analysts though aren’t expecting the ECB to make that change at this week’s meeting.

Meanwhile, according to a report published last week by BCA Research, gold is currently oversold, a sentiment which if widely accepted could be enough to push the price above 1500.00.
The US ISM Non-Manufacturing PMI for October is due out at 15.00 UTC today and is expected to be little changed from September’s 54.4 points.
The most anticipated US reports for the week will be Unemployment Claims for last week, due out on Thursday, and October’s Non-Farm Employment Change and Unemployment Rate on Friday.
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