- 74% of all SWFX positions are short, up from 69% on Friday
- By soaring from 1,272.24 the bullion will be able to set a new bullish goal at 1,287/88 (May 9 high; weekly R1)
- Daily and weekly technical signals are bullish
- Economic events to watch over the next 24 hours: US Empire State Manufacturing Index (May); RBA Meeting Minutes; New Zealand Inflation Expectations (Q1); Japanese Final Industrial Production (Mar)
Gold climbed for a second trading session on Monday, supported by a slowing growth in China in weakness in equities. China's industrial production, retail sales and investment undershot expectations in April, despite Beijing's aggressive easy-money policies in the first quarter, indicating ongoing weakness in the world's second-biggest economy. However, better-than-expected US data last week renewed expectations the Fed will raise interest rates more than once this year, limiting gains in bullion.
US retail sales surged the most in a year in April as Americans boosted purchases of automobiles and a range of other goods, suggesting the economy was regaining momentum after growth almost stalled in the first quarter. According to the Commerce Department, retail sales advanced 1.3% last month, the largest increase since March 2015. March's retail sales were revised up to a 0.3% decline compared with the previously reported 0.4% drop. Stripping out automobiles, gasoline, building materials and food services, retail sales climbed 0.9% in April following an upwardly revised 0.2% gain in March. If consumers can spur stronger economic growth in the coming months, that could influence the Fed's decision on when to hike its benchmark interest rate. Macroeconomic Advisers revised its expectation for second-quarter GDP growth to a 2.3% annualized increase from 2%. Barclays raised its forecast to 2.2% from 2%. The Federal Reserve Bank of Atlanta's real-time estimate of economic growth moved to a 2.8% rise, from the prior estimate of 2.2%. Separately, consumer confidence rebounded to its strongest level in nearly a year in May. The University of Michigan preliminary consumer sentiment index for May came in at 95.8, compared with a final April reading of 89.0.
China's industrial production, retail sales and investment undershot expectations in April, despite Beijing's aggressive easy-money policies in the first quarter, indicating ongoing weakness in the world's second-biggest economy. Industrial output increased 6.0% year-over-year in April, down from 6.8% growth in March, the National Bureau of Statistics reported, coming in below economists' forecast for a 6.6% gain. In addition to that, retail sales rose by a less-than-predicted 10.1% in April compared with a year earlier, slowing from March's 10.5% year-over-year surge. Fixed-asset investment in urban areas grew by a weaker-than-expected 10.5% year-over-year in the January-to-April period, compared with an annual increase of 10.7% for the first three months of 2016. Economists do not expect policy makers to ease monetary policy in response to the April data, although another bout of market volatility could alter that. The People's Bank of China said that monetary policy remained unchanged, pledging to keep a "prudent" policy and use flexible tools to ensure adequate liquidity. China's economy continues to combat significant headwinds, including rising debt levels and the economic drag of too many factories pumping out more products than there is demand for. Coal consumption, steel production and exports were weaker in April, while the official and Caixin purchasing managers' indexes came in worse than expected last month.
Upcoming fundamentals: RBA minutes to show willingness to act further
The Reserve Bank of Australia is due to publish the minutes of its most recent monetary policy meeting at 1:30 GMT on early Tuesday morning. Investors will be looking for possible clues of the next cut to the benchmark interest rate. In the meantime, final Japanese industrial production for March is up at 4:30 GMT, while New Zealand will publish its fresh inflation expectations based on the survey of economists conducted in the first quarter of this year.
Gold receives bullish momentum from weekly PP
The monthly pivot point at 1,265.92 has not been confirmed for a second time in a one week on Friday. Provided with a boost, gold prices returned above the 1,270 level and are expected to see more positive impetus coming from the weekly pivot point, which lies at 1,272.24. The key bullish target is the 1,287/88 zone, where the most immediate supply is offered by the weekly R1 and the May 9 peak. At the same time, the monthly PP and 20-day SMA should guarantee the short-term demand for the bullion. Daily and weekly technical signals are supporting the positive case, as they indicate to the upside.Daily chart
In the 1H chart the yellow metal is dealing with the 200-hour SMA at the moment, the line that is located at 1,274.70. By crossing this resistance, the price should start aiming at the May downtrend at the level just below 1,285. This is where we are looking for initial downward pressure. Within the broadening falling wedge pattern a slump may extend down to the 1,245 area, where XAU/USD will face not only the pattern's lower edge, but also the March-April uptrend. However, in case there is a consolidation above the 1,285 over the next 24 hours, then the 1,300/07 range will restore its relevance.
Hourly chart
SWFX market sentiment tumbles to new 11-week low
Meanwhile, OANDA clients are overwhelmingly positive (62.6%) with respect to gold, up from 61.6% before the weekend. On top of that, almost 55% of SAXO Bank clients are betting the metal will grow in price.