Gold prices continue to fall, as the spot price stands at $1219.60 per ounce on Thursday. XAU/USD is at its lowest levels since late December of 2013. On the release front, there are three key events on the calendar - Building Permits, Unemployment Claims and the Philly Fed Manufacturing Index. As well, Federal Reserve Chair Janet Yellen will deliver remarks at an event in Washington.
The US dollar gained close to 100 points on Wednesday following the Federal Reserve statement. The Fed statement reaffirmed that interest rates would remain ultra-low for a "considerable time" after the asset purchase scheme (QE) ends next month, but surprised the markets in hinting that once a rate hike was introduced, rate levels could move up more quickly than expected. As expected, the Fed trimmed QE by $10 billion/month, and the remaining $15 billion/month is scheduled to be phased out in October.
US inflation data was worse than expected on Wednesday. CPI, the primary gauge of consumer inflation, came in at -0.2%, its first drop since October. The estimate stood at +0.1%. Core CPI followed suit with a flat reading of 0.0%. This was the first time the index failed to post a gain since October 2010. The weak numbers follow disappointing manufacturing inflation data. PPI, a key event, dipped to just 0.0%, a 3-month low. The estimate stood at 0.1%. Core PPI slipped to 0.1%, down from 0.2% a month earlier. This matched the forecast. Low inflation continues to be a concern and could delay an interest rate hike in 2015.
Will the United Kingdom remain united on Friday? It's anyone's guess as Scottish voters cast their ballots in a historic referendum on independence on Thursday. The most recent polls are pointing to a close vote, with many voters still undecided. If voters do choose to secede from the UK, this would create plenty of questions and uncertainty, including what currency an independent Scotland would use and how the national debt would be divided. A vote to split up the UK could lead to turmoil in the markets and weigh heavily on the markets. Traders should treat the referendum as a market-mover, as a close vote could have negative repercussions for gold.
XAU/USD 1219.60 H: 1225.54 L: 1218.03
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