- 63% of all SWFX positions are short
- 55-day SMA raises upside risks, but bullish failure may quickly expose the 1,235/33 area (monthly/weekly S1)
- Daily technical indicators are undecided
- Economic events to watch over the next 24 hours: French, German, Euro zone Flash Services and Manufacturing PMI (May); US Manufacturing PMI (May); FOMC Members Bullard, Williams and Harker Speak; RBA Governor Stevens Speaks
Gold increased slightly on Monday as the US Dollar weakened, but the precious metal continued to trade near three-week lows amid growing expectations that the Fed will raise interest rates as soon as next month. Holdings in the world's largest gold-backed ETF SPDR Gold Trust edged higher 1% to 869.26 tonnes on Friday, the highest level since November 2013.
US home resales continued to rise, increasing more than expected in April, as housing demand strengthens alongside gradual job growth and ultra-low interest rates. Sales surged 1.7% in April from the previous month to a seasonally adjusted annual rate of 5.45 million, the National Association of Realtors reported. Economists had predicted sales would climb 1.3% to a rate of 5.40 million in April. Sales soared 6.0% from a year ago. Nevertheless, there were regional variations. While sales of existing homes surged in the Midwest by 12.1% last month and also increased in the Northeast, the South and West declined. Thus, affordability remains a key issue. The national median sale price for a previously owned home last month stood at $232,500, up 6.3% from a year earlier, marking the 50th consecutive month of year-over-year gains. Prices are rising at a far faster rate than most workers' wages, average weekly earnings adjusted for inflation climbed just 1.3% in April from April last year. Also, the NAR said there were 2.14 million existing homes available for sale at the end of April, up 9.2% from March as sellers put their homes on the market for the spring selling season. However, compared with April a year ago, inventory declined 3.6%. That is a 4.7-month supply at the current sales pace.
Canadian retail sales dropped more than was forecasted in March, after two months of strong gains from February, against the background of consumers who bought fewer cars and home furnishings. Statistics Canada reported a 1.0% decline in retail sales that exceeded economists' forecasts for a 0.6% decrease. In volume terms, sales in March declined 1.3%, while sales at car and parts dealers dropped 2.9% as Canadians bought fewer new and used cars. In addition, core retail sales, which exclude autos slipped 0.3%. Purchases at furniture stores tumbled 3.7%, while lower prices pulled sales at gasoline stations down 1.1% to their lowest since August 2010. Furthermore, a separate research showed that Canadian inflation rose in line with forecasts in April. According to the report from Statistics Canada, April consumer price inflation rose 0.3% from the previous month, in line with the consensus forecast and below March's 0.6% increase. Year-on-year CPI advanced 1.7%, in line with forecasts in comparison with April's reading of 1.3%. However, core inflation, which excludes food and energy, rose 0.2% from the prior month, compared to the expected 0.1% gain, while year-on-year core CPI climbed by 2.2%, beating the forecasts for a 2.0% gain and March's 2.1% increase.
Upcoming fundamentals: FOMC speakers to continue calling for June rate hike
A 2016 voting member of the Federal Open Market Committee and President of the St. Louis Fed James Bullard is set to talk about economy and monetary policy in Beijing at 10:15 GMT on Monday. Bullard has traditionally been a member of the hawkish camp of the Federal Reserve. Investors forecast that he will support an increase of the target range for the Fed Funds rate as soon as June or July. In the meantime, San Francisco's John Williams will deliver a speech on monetary policy in New York at 12:00 GMT, while Philadelphia Fed President Patrick Harker will speak at 22:30 GMT.
Gold turns positive amid 55-day SMA
Friday was the second day in a row when gold prices failed to slide below the 55-day moving average line, currently placed at 1,249.95. As a result of that, we observe growing probability of a recovery in the short-term. The bullion will face the first resistance at 1,261/62, the level reinforced by the weekly pivot point and 20-day SMA. The monthly pivot follows both of them at 1,265.92 and acts as the second supply for Monday. Alongside, by failing at the 55-day SMA gold will see its closest support as low as 1,235/33 this time. Technical indicators are giving mixed signals on a daily time frame.Daily chart
Making the May 10-19 downtrend line as another support for the yellow metal in the 1H chart, this commodity is set to appreciate in the foreseeable future with the benchmark resistance resting just above 1,280. However, the 200-day SMA will challenge bullish intentions at 1,268.14 and a failure here may easily provoke another sell-off towards 1,240.
Hourly chart
Bullish market portion continues to improve
Meanwhile, OANDA and SAXO Bank clients are overwhelmingly positive with respect to gold, precisely in 66.5% and 60% of all cases, respectively, in the morning on May 23.