Gold prepares for more fundamental impetus

Note: This section contains information in English only.
Source: Dukascopy Bank SA
  • Bullish market share rallied to 73%, the highest level since early August
  • Markets are waiting for US retail sales report on Friday
  • Five out of eight daily technical indicators recommend selling the precious metal
  • Economic events to watch in the next 24 hours: German and French CPI (Oct); Euro zone Industrial Production (Sep); ECB President Draghi Speaks; US Unemployment Claims (Nov 6), Crude Oil Inventories (Nov 6) and Monthly Budget Statement (Oct); FOMC Members Yellen, Lacker, Bullard, Evans, Dudley and Fisher Speak; Japanese Industrial Production (Sep) and Tertiary Industry Activity (Sep)

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Commodities were mainly losing value throughout the trading session on Wednesday. Corn was the only component to increase by 0.9%, while the slowest decline of 0.3% was posted by gold. The latter was tumbling along with silver (-0.7%), but these changes are considered as normal daily price swings when the session is not rich on any fundamental drivers. More importantly, oil prices spent yesterday's trading in a clear downtrend as they reached two-week low amid worse than forecasted rise of US reserves for the week ended Nov 6. Report from American Petroleum Institute revealed that stockpiles surged by 6.3 million barrels, way above one million barrels that had been anticipated by economists before the publication. This report should not be mixed with another release on US crude oil inventories, which will be published by the Energy Information Administration later on Thursday. According to the International Energy Agency, investment in oil exploration and extraction will be trimmed next year, but US consumption may decrease along with that. Yesterday Crude and Brent prices dropped by 2.9% and 3.4% to $42.93 and $45.81, accordingly.

Returning back to gold, it continued to trade near the lowest level in three months, as investors are awaiting US interest rate hike in December and looking for more hints from the Fed officials speaking later in the session. Assets in SPDR Gold Trust, the top gold-backed exchange-traded fund, dropped to 663.43 tonnes on Tuesday, the lowest level since September 2008 when Lehman Brothers filed for bankruptcy, spurring a global financial crisis. Meanwhile, low bullion prices spurred demand for physical gold, with buying of gold including coins, jewellery, bars surging to the highest level in two years.

New Zealand manufacturing activity continued to increase in October, albeit at a slower pace than a month earlier. The BNZ-BusinessNZ performance of manufacturing index dropped to a seasonally adjusted 53.3 last month, down from 55 in September, marking the lowest level since May. The nation's manufacturing sector has been growing since October 2012. Even though four of the five sub-sectors of the index dropped, all but finished stocks remained in expansion. The data showed the measure of new orders fell to 55.9 from 57.4 in September, production declined to 53.1 from 57.5, deliveries dropped to 52.5 from 55.2, and finished stocks decreased to 49.2 from 52.4. Meanwhile, employment rose to 52.4 from 51.1.


Japan's machinery orders increased in September for the first time in four months, but firms predict modest gains in orders in the final quarter of the year, signalling the economy's rebound from the recession could be slow. Core machinery orders soared 7.5% in the reported month, beating economists forecast for a 3.3% gain, and following the 5.5% decline in August. Machinery orders, excluding ships and utility items plunged 10.0% in the third quarter, but were seen to pick up 2.9% in the three months through December. Policy makers are counting on increases in business investment to create new jobs, boost productivity and underpin growth. The machinery orders data indicates the Japanese government faces a challenge to persuade companies to invest.

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Upcoming fundamentals: Six Fed's FOMC members to speak a lot on Thursday



There are many members of the Federal Open Market Committee who are going to deliver speeches in the next 24 hours. Chair of the Fed Janet Yellen will talk at the Conference on Monetary Policy Implementation in the Post-Crisis Period in Washington DC. Fed Governor Stanley Fischer will also speak at the same conference. Meantime, Chicago Fed President is going to speak about monetary policy and economic perspectives in Chicago, and he will face audience questions after that. New York Fed President William Dudley will also mention monetary policy and economic outlook in his speech to the Economic Club in New York.


Gold prepares for more fundamental impetus

We continued to observe very calm trading of the precious metal yesterday. Price is currently placed slightly above this week's low at 1,088. Some momentum can be generated by the Fed Chair Janet Yellen's speech on Thursday and US retail sales data tomorrow. Short traders see the Buck higher at 1,070 in terms of gold prices. Bulls see monthly S1 (1,100) as their main resistance for the moment. Meantime, trading volume declined to four-day low yesterday. RSI technical indicator suggests that gold remains oversold after a sharp sell-off in the beginning of November.

Daily chart
© Dukascopy Bank SA

As expected, XAU/USD paid no attention to the bearish pattern's upper boundary as it continues to develop in a sideways trend. With 200-hour SMA preserving its downward slope, we see more bearish pressure in the next few days.

Hourly chart
© Dukascopy Bank SA

SWFX bullish share skyrockets to highest level since early August

It seems that bears are actively closing their short positions in the SWFX market, because their share crashed substantially in the past 24 hours. Bulls gained considerable ground and now they have almost three out of every four open positions in their hands (73%). This is the highest mark in more than three months, providing an undeniable positive signal for gold prices.

Meantime, OANDA's long traders are also holding more than three out of every four open positions at the moment, namely 75.66% in the morning on Thursday. Additionally, almost 74% of SAXO Bank clients preserve their positive stance with respect to gold.













Spreads (avg,pip) / Trading volume / Volatility


Average expectation among market participants for the end of February 2016 is 1,140

Meanwhile, traders, who were asked regarding their longer-term views on gold between Oct 12 and Nov 12 expect, on average, to see the metal around 1,140 by the end of next year's February. At the same time, 45% of participants believe the price will generally below 1,150 in ninety days. Alongside, 31% of those surveyed reckon the price will trade in the range between 1,150 and 1,300 throughout the next three months.

© Dukascopy Bank SA

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