- More than seven out of ten SWFX traders are betting on losses of the bullion
- Monthly trend-line is driving prices steadily to the upside
- Technical studies on both daily and weekly time frames are forecasting a rally for gold prices
- Economic events to watch over the next 24 hours: Euro zone Flash CPI (Feb); US Chicago PMI (Feb) and Pending Home Sales (Jan); UK Mortgage Approvals (Jan); Canadian Current Account (Q4); Japanese Unemployment Rate (Jan); Australian Building Approvals (Jan); Chinese Manufacturing PMI (Feb); RBA Interest Rate Decision; FOMC Member Dudley Speaks
Gold rose on Monday and was set to enjoy the best monthly performance in four years, as turbulence in equity markets spurred safe-haven demand. Holdings in SPDR Gold Trust, the world's top gold-backed exchange-traded fund, increased 0.27% to 762.41 tonnes on Friday, the highest in about a year. Bullion has gained 9.6% in February, the biggest monthly jump since January 2012.
The world's number one economy unexpectedly grew at a faster pace in the final quarter of 2015 than initially estimated, reflecting a higher value of business inventories. The US economy expanded at a 1% rate in the final three months of 2015, better than a previously reported 0.7% gain, according to the Commerce Department. The economy still lost a lot of momentum, though, after growing 2% in the third quarter. Nevertheless, growth is projected to re-accelerate this year as consumers enjoy the benefits of a improving job market and savings on gasoline to boost spending. US businesses reduced inventories much less than initially estimated in the fourth quarter. The revised inventory estimate entirely accounts for the upward revision of GDP growth. The change in private inventories provided a 0.14 percentage point drag on growth, rather than the 0.45 point drag estimated a month ago. At the same time, household spending, the backbone of the US economy, rose even less, the revisions showed. Consumers bought $56.9 billion worth of goods and services at the end of the year. That is an increase of 2% in annualized terms compared to three months earlier. Moreover, imports subtract from GDP, as they fell at a 0.6% pace, compared with the initial reading of a 1.1% gain. However, exports contributed to GDP growth.
Japan retail sales unexpectedly dropped for the third month in a row in January, indicating continuing softness in consumer sentiment and suggesting consumer demand is unlikely to spur a recovery in growth this quarter. Sales slid 0.1% year-on-year in January, compared with economists' forecast for a 0.2% increase. Measured on a monthly basis, retail sales dropped 1.1% in January, the Ministry of Economy, Trade, an Industry reported. Weak consumer spending has been a drag on overall growth of the world's third biggest economy in recent quarters. Gross domestic product contracted 1.4% in the fourth quarter amid bigger-than expected decline in household spending. Private consumption decreased 0.8% over the fourth quarter, subtracting 0.5 percentage points from GDP growth. Meanwhile, a separate report showed Japan's industrial output increased 3.7% in January, up for the first time in three months. Manufacturers predict output to decline 5.2% in February and increase 3.1% in March. Prime Minister Shinzo Abe's three-arrowed based economic strategy, which includes monetary expansion, fiscal stimulus and structural reforms, has seen the economic performance of the world's third biggest economy patchy at best so far.
Upcoming fundamentals: RBA rate decision to come out early Tuesday morning
There are two vital data releases from Asia that will be monitored by economists around the world over the next 24 hours. First, Chinese government will publish officials numbers on activity in manufacturing sector of the country at 1:00 GMT in the night between Monday and Tuesday. This industry has seen a contraction for six months in a row, judging from the official data. This time analysts foresee no change to the PMI at 49.4 points in February. A rate decision from the Reserve Bank of Australia will be known at 3:30 GMT on Tuesday morning. It maintained the cash rate at 2% last time and the survey of experts suggests there will be no change tomorrow as well. There have been mixed signals coming from the regulator during recent times. Analysts still believe a rate decrease is the question of next few months.
Gold: February uptrend holds ground
As long as the bullion keeps trading above the February uptrend, currently at 1,217.36, the outlook will preserve a positive bias for the nearest future. Moreover, any loss should be contained at 1,200 where the price, if it experiences a decline, will inevitably meet another bullish support from January. Moreover, there we also have a location of the 20-day SMA and weekly S1 for the moment. The key target for bullish traders, who are strengthened by daily and weekly technical indicators, is the weekly R1 at 1,249. Success here will put at risk the recent February high at 1,263.Daily chart
In the 1H chart the yellow metal is strongly respecting the February trend-line that is heading confidently to the upside. More demand is coming from the 200-hour SMA, currently at 1,222.34.
Hourly chart
More than 70% of all traders expect gold prices to correct lower
Meanwhile, SAXO Bank clients are only 50.87% long with respect to the precious metal. However, OANDA traders are more positive on the matter in the morning on Monday, as 55.70% of all open positions are bullish and just 44.30% bearish.