- Opened positions for Gold are strongly positive (75% bullish / 25% bearish)
- It is possible that Gold will grow in price, with the closest resistance for it located at 1,205
- At the same time, the probability of a downside movement exists as well, while for that purpose the closest support is placed at 1,168
- Upcoming events: US Federal Funds Rate, FOMC Statement, US Inflation, MPC Meeting Minutes
Investors will be watching closely the Fed's two-day meeting, which starts today and which may bring some clues on the timing of interest rate increase. Signs of resilience in the world's number one economy have raised bets that the central bank will hike interest rates next year which could weigh on the precious metal, a non-interest bearing asset. Meanwhile, assets in the SPDR Gold Trust, the largest bullion-backed exchange-traded product, resumed a drop yesterday following the first back-to-back weekly rise since July.
Industrial production in the world's number one economy rose in November as factories increased output of cars, machinery, clothing and other goods, a sign of surging demand for American products amid falling oil prices. Industrial production, which measures the output of US manufacturers, utilities and mines, soared a seasonally adjusted 1.3% from the previous month, according to the Fed. That followed a gain of 0.1% in October, revised up from the earlier reported 0.1% decline. Capacity utilization, an indicator of slack in the industrial sector, rose to 80.1% in November, the highest rate since March 2008 and compared with October's revised reading of 79.3%. Overall industrial output in November increased 5.2% from a year earlier.
All eyes turn to Fed as it makes interest rate decision
Tomorrow, the most attention of the market will be turned to North America, where the Federal Reserve is going to make its interest rate decision. Even though the rate is likely to stay unchanged for now, markets will wait for some forward guidance about the potential increase of the benchmark and comments from the Fed's Board. This event, combined with the meeting minutes of the Bank of England will probably have the most considerable impact on the price of Gold on Wednesday.XAU/USD returns back below down-trend
The XAU/USD cross has breached the most important resistance line, represented by the long-term downtrend and developed above this level for the past week. However, on December 15 Gold returned back, mostly amid fundamental factors. At the moment the most considerable resistance is represented by this long-term downtrend line, which is currently located at $1,205 and strengthened by the monthly R1 and 55-day SMA. Nevertheless, by the end of the year we are still suggesting Gold to depreciate and trade in the direction of the monthly pivot point at $1,168.Daily chart
Taking into account the day-on-day basis of Gold's development, on Monday it declined significantly and even breached the important support at $1,205. However, it seems the bearish momentum was spent completely when crossing this level, as XAU/USD was easily stopped by the next demand level at $1,193, represented by the weekly S1. As a result, we are expecting Gold to recover slightly on Tuesday, as this idea is also assumed by daily technical indicators.
Hourly chart
Long opened positions on Gold surged to reach 75%
Spreads (avg,pip) / Trading volume / Volatility
Traders, who were asked regarding their longer-term views on XAU/USD between Nov 16 and Dec 16 expect, on average, to see the pair just below 1,200 by the mid-March. At the same time, 45% of them believe Gold will be above this mark in three months, while one third of traders surveyed forecast the bullion to trade in the range between 1,050 and 1,200.