- SWFX traders remain committed to long positions and keep their share above 70%
- Failure to close above July low (1,070) helps to retain bearish expectations on the metal
- Daily technical indicators continue to be bearish on gold
- Economic events to watch in the next 24 hours: Spanish Unemployment Change (Nov); Euro zone CPI (Nov); US ADP Employment Change (Nov), Non-Farm Productivity (Q3), Labour Costs (Q3) and Crude Oil Inventories (Nov 27); FOMC Member Lockhart Speaks; Fed Chair Yellen Speaks; Fed Beige Book Release; UK Construction PMI (Nov); Bank of Canada Interest Rate Decision; Australian Trade Balance (Oct)
Following two sessions of gains, gold continued to trade higher, supported by a decline in the US Dollar after soft manufacturing data. Yet, the outlook for the precious metal remains bearish due to looming US interest rate hike, with investors' attention now turning to the US non-farm payrolls data due later in the week. A sturdy jobs report would further strengthen the chances of a rate increase later this month, denting appeal of dollar-denominated gold. The Fed is widely expected to raise US rates for the first time in nearly a decade at its next meeting on December 15-16.
The Australian economy grew at a faster pace than economists predicted in the third quarter, led by the fastest gain in exports since 2000, and supporting the Reserve Bank of Australia decision to maintain rates on hold. Australia's gross domestic product rose 0.9% in the July-September period from the preceding quarter, when it rose a revised 0.3%. Economists, however, had predicted a 0.8% gain. Despite a slowdown in Australia's biggest trading partner, China, and falling commodity prices, exports increased, providing the economy with a boost. Net exports added 1.5 percentage points to growth over the reported period, after subtracting 0.6 percentage points from growth in the second quarter. In addition to that, final household consumption was also one of the biggest contributors to growth last quarter, climbing 0.7%. Measured on an annual basis, the Australian economy expanded 2.5% in the three months through September from a year ago, compared with 1.9% in the previous quarter and overshooting forecasts for a 2.4% growth.
Canada's economy expanded for the first time in three quarters as gains in automotive exports and consumer spending offset the damage from lower oil prices. Gross domestic product expanded at a 2.3% annualized pace from July to September, Statistics Canada reported. Canada's "two-speed" economy – defined by low oil prices and momentum outside of the energy sector – needs until the middle of 2017 to return to full capacity, Bank of Canada Governor Stephen Poloz estimated. The central bank makes its next interest-rate decision later in the day. Exports surged 9.4% in the September quarter driven by automobiles and consumer goods, while imports dropped 2.9%, Statistics Canada said. Consumer spending rose at a 1.8% annualized pace. However, the pace of economic growth was slowed by a 3% decrease in business investment, the third drop in a row. Government expenditures also declined by 1.6%.
Upcoming fundamentals: Bank of Canada to keep interest rates flat at 0.5%
While the European Central Bank's decision on interest rates is looming, other news from various central banks are quite likely to be ignored by the markets. Nonetheless, the Bank of Canada's decision will be known later today. The regulator is broadly estimated to hold interest rates flat at the current level of 0.5%. BOC officials have recently affirmed issues connected with low energy prices and their effect on Canada's economic growth, but a rate cut seems unlikely from the present level, the lowest since 2010. Sharper volatility for both FX and commodity markets can be triggered by the upcoming speech of Janet Yellen, the Fed Chair. She is going to talk about the US economic perspectives at the Economic Club of Washington DC.
Buoyant Dollar rejects gold's rally beyond July low
XAU/USD's advance was prolonging up to the weekly R1 at 1,074 on Tuesday. However, the bearish pressure was rising over time, even despite fairly pessimistic US manufacturing data. Main focus, which is shifting back to the Fed, did not prevent the bullion's cooldown by the end of trading. Therefore, our outlook is unchanged with the "negative" status. Initially, the metal is required to reclaim the 1,063 mark, which is safeguarded by the weekly pivot point. Meanwhile, trading volume spiked to the highest level since Nov 20, meaning volatility is on the rise.Daily chart
Similar to the EUR/USD currency pair, the bullion is unable to fight against the 200-hour SMA, which acts as a strong resistance for the price. In the one-hour chart the spot is located near the moving average and the bearish pattern's upper edge at 1,070/72. A sell-off down to the 1,050/48 area looks possible over the next few days, in case the mentioned levels build up extra bearish momentum.
Hourly chart
SWFX bulls secure more than 70% of the market
On top of that, the yellow metal retains the "overbought" status in both OANDA and SAXO Bank markets. The former's clients are holding 69.94% of bullish open trades, while SAXO Bank traders are gold-long in 68.29% (+3.5%) of all cases.