- Market sentiment saw a rebound in terms of bullish positions, to 33% from 27% yesterday morning
- Success above 1,209 to expose 1,221; bearish traders try to focus on October high at 1,191
- On aggregate, daily technical indicators are bullish; MACD is the only one pointing downwards
- Economic events to watch over the next 24 hours: French and Swedish CPI (Jan); Euro zone Current Account (Dec); ECB Monetary Policy Meeting Accounts; US Unemployment Claims (Feb 13), Philadelphia Fed Manufacturing Index (Feb) and Crude Oil Inventories (Feb 12); FOMC Member Williams Speaks; Swiss Trade Balance (Jan); MPC Member Cunliffe Speaks
Gold snapped a three-day losing streak after dovish minutes of the FOMC January meeting fuelled bets that the US central bank could slow the pace of interest rate hikes. Policy makers considered changing the planned pace of interest rate increases for 2016 amid fears that a global slowdown and financial market sell-off could hit hard the US economy. A slower rate hike pace could underpin demand for gold, which posted its third consecutive annual drop in 2015 on concerns that higher interest rates would undermined appeal of the non-interest paying asset.
Policy makers of the Federal Open Market Committee saw growing uncertainty over the outlook for inflation and growth, according to minutes of the January meeting, when the key lending rate was kept unchanged. US rate setters left the target range for federal funds rate on hold at 0.25% to 0.5%, after lifting it from near-zero in December. Many analysts are predicting further increases this year. While most of policy makers stuck to the expectation of 2% inflation over the medium-term, a number of members "viewed the outlook for inflation as somewhat more uncertain or saw the risks as being to the downside". However, the available data were not sufficient to assess the balance of risks to the economic outlook. Given the elevated risks, both external and domestic, some members wanted to see an evidence of inflation moving back to the 2% target before they were willing to consider further rate increases. Meanwhile, US industrial production rose for the first time since July in January. America's industrial output increased 0.9% on month in January, up from a downwardly revised 0.7% decline in December. Capacity utilization, a measure of slack in the industrial sector, meanwhile, rose to 77.1% in the reported month, following the downwardly revised 76.4% in December.
China's consumer prices rose at the strongest rate in five months in January after vegetable prices increased in the run-up to the Chinese New Year. China's consumer price index climbed 1.8% in January from a year earlier, compared with a 1.6% annual rise in December, according to the National Bureau of Statistics. Increase in food prices were the main contributor to the inflation acceleration, as they surged 4.1%. Thus, the rise of inflation did not reflect a visible improvement in economic activity or broader consumer demand. Meanwhile, the non-food consumer inflation climbed 1.2% on an annual basis in January. At the same time, producer price index dropped 5.3% in January from a year earlier, declining for the 47th consecutive month and following a 5.9% slide in the prior month. Meanwhile, China's policy makers reassured nervous investors that Beijing will cushion the slowing economy, keep its currency steady and ensure employment remains stable. A rout in Chinese stocks last summer and the unexpected devaluation of the Yuan in August have shocked global markets, fuelling concerns about the health of the world's second-biggest economy and Beijing's ability to steer it simultaneously through both a prolonged downturn and radical restructuring.
Upcoming fundamentals: Philadelphia's manufacturing to keep contracting
The first US data release on Thursday is up at 13:30 GMT when both unemployment claims and Philly Fed Manufacturing Index are published. The latter is estimated to contract for a third consecutive month, as any reading below zero indicates that conditions for manufacturing companies in the Philadelphia region are worsening. For the Philadelphia Fed-released indicator, the average analysts' expectation stands at -2.9 points for February, up slightly from -3.5 points we had seen in the beginning of 2016. Alongside, initial claims for US unemployment benefits are forecasted to grow to 275,000 for the week ended February 13, up from 269,000 one period before. Meanwhile, San Francisco Fed President John Williams will speak at 20:30 GMT about US economy is Los Angeles. He is a non-voting FOMC member this year.
Gold lacks stronger upside momentum
The daily chart has been showing mixed signals for several days in a row. Gold tested the third monthly resistance (1,209) yesterday, but ultimately closed the session below it. By succeeding here, the bulls will be in a position to prolong gains to 1,221 (weekly PP) over the next 24 hours. We cannot rule out the bullion will fail in the vicinity of this supply. An attempt of attacking October high (1,191) is possible, even though daily indicators tend to oppose bearish scenario. Below 1,190 would reassure us a correction is on the table.Daily chart
A perfect movement along the 200-hour SMA is being booked by the bullion in the 1H chart. An upside case from here would allow for a rally to extend to 1,232 (May high) in the mid-term. While above the moving average, our outlook is neutral. A slide below will immediately change it to bearish and the focus will turn to the August high at 1,170.
Hourly chart
Sentiment improves from multi-year lows
There is almost the same number of traders betting on gold's advance in both OANDA and SAXO Bank markets as 24 hours ago. OANDA's long market participants are responsible for 62.5% of all open traded at the moment. The same applies for 57% of SAXO Bank clients.