Gold Steady Ahead of US Consumer Inflation, Jobless Claims

Gold has posted modest gains on Thursday, recovering losses sustained a day earlier. On the release front, it’s a very busy day, with four key indicators – Core CPI, CPI, Unemployment Claims and the Philly Fed Manufacturing Index. Any unexpected readings from these events could translate into some volatility from EUR/USD.

The Federal Reserve released its minutes on Wednesday and there were no clues about the timing of a rate hike. The markets are expecting rates to rise in the second half of 2015, but this will of course depend on economic conditions. With inflation below the Fed target of 2%, there is less pressure to raise rates. The minutes also noted that that weak economic outlooks in Europe and Japan are unlikely to have a negative impact on the US economy.

The ECB hasn’t had much success in kick-starting the ailing Eurozone economy. Deep interest rate cuts haven’t boosted growth or inflation, so the ECB has reached deeper into its toolbox and purchased covered bonds and asset-backed securities. So far, these purchases have been from the private sector, but the ECB could decide to expand these purchases to government bonds, known has quantitative easing (QE). However, there is strong resistance to QE from national central banks, such as the powerful German Bundesbank. Speaking before a European parliamentary committee on Monday, Draghi said that QE remains at option. If the ECB does decide to make such a move, the wobbly euro could lose more ground.

XAU/USD 1192.79 H: 1197.13 L: 1176.82