- 70% of all SWFX positions are short
- Nearby support is located at 1,269/63, while any growth is expected to be capped by weekly PP at 1,286
- Daily technical signals are bullish
- Economic events to watch over the next 24 hours: French and Swedish CPI (Apr); Euro zone Industrial Production (Mar); Bank of England Interest Rate Decision, Meeting Minutes and Inflation Report; US Unemployment Claims (May 7); FOMC Members Mester, George and Rosengren Speak
Gold traded near $1,280 an ounce on Thursday after gaining the most since late April in the preceding session, supported by a weaker US Dollar and equities. Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, were at 27.07 million ounces on Wednesday, the highest level since December 2013. In light of negative interest rates and slow growth worldwide, investors have stepped up demand for gold in record-breaking manner. Gold demand soared 21% in the first quarter of 2016, the fastest pace on record, according to a World Gold Council report.
Japan posted its largest monthly current account surplus in nine years in March, led by an improved trade balance and robust returns from foreign investments. The excess in the widest measure of the nation's trade came in at 2.98 trillion yen in March, according to data released by the Ministry of Finance, compared with 2.43 trillion yen in February. The country's current account surplus expanded 6.9% year-over-year. The trade surplus climbed 39% to 927.2 billion yen from the previous year, as Japan's import bill declined due to lower global fuel prices. The services surplus also widened as a record number of tourists visited Japan. However, weakness in exports and domestic demand continue to slow Japan's economic growth, and a stronger Yen is undermining profits at corporate giants including Toyota Motor Corp. and may reduce the money they repatriate to Japan. Since the start of the year the Japanese Yen has gained as much as 12% versus the US Dollar, denting into overseas earnings and undermining the competitiveness of Japanese-made goods. Earlier this week, Japan's Finance Minister Taro Aso tried to jawbone the Yen low by reassuring that the government is ready to "undertake intervention" in currency markets should the Yen climb further.
American employers posted the most open jobs in eight months in March, but total hiring slowed, sending mixed signals of the labour market. Job openings rose 2.7% to 5.76 million, the most since July, the Labor Department reported. That may suggest better hiring in the coming months. Yet hiring slowed to 5.3 million from 5.5 million. That indicates employers became more reluctant to fill open positions, due to slower economic growth from October through March. The decline in hiring echoes a pullback that was reported last week, when the official data showed net hiring slowed in April. Yet the increase in job openings suggests that job gains could pick up again in the coming months. Last week's non-farm payrolls report showed the world's biggest economy created the fewest number of jobs in seven months and Americans dropped out of the labour force, casting doubts on whether the Fed will hike interest rates before the end of the year. According to the Labor Department, non-farm payrolls rose by 160,000 jobs last month as construction employment barely climb and the retail sector shed jobs. That was the smallest gain since September and below the first-quarter average job growth of 200,000. Moreover, employers appeared to add 19,000 fewer jobs in February and March than previously estimated. While the unemployment remained unchanged at 5.0% it came at cost of people dropping out of the labour force. The share of Americans participating in the labour force dropped to 62.8% in April from 63.0% in March.
Upcoming fundamentals: Two voting FOMC members to talk Thursday
Presidents of Federal Reserve banks of Cleveland and Kansas City are going to talk later in the day, meaning somewhat uplifted volatility can be well expected. Bottom line: both of them, Loretta Mester and Esther George, are voting members of the Federal Open Market Committee this year. Moreover, they are assumed to be one of the most hawkish members around the discussion table. Kansas City's George has already dissented twice and favoured a hike of the Fed Funds rate in March and April. She will speak on the economy in Albuquerque, New Mexico as 17:30 GMT. Loretta Mester from Cleveland Fed will talk on monetary policy in Germany at 15:00 GMT. Meanwhile, there is another FOMC member to give a speech later on Thursday. Eric Rosengren, the Boston Fed chief, will talk at 15:45 GMT.
Gold: key support area placed at 1,265/63
Despite large-scaled rally of gold futures on Wednesday, the bullion is being pushed back to the downside in the early morning of Thursday. Technically, a decline below the 1,263.87 marked is unlikely, as this level is backed from above by the 20-day SMA, monthly pivot point and weekly S1. Still, in case the sell-off continues, then the second daily demand can be found near 1,250. However, bullish daily technical indicators suspect gold will manage to turn around later today. Any near-term advance should find a cap at 1,286.49 (weekly PP).Daily chart
The outlook seems to be less optimistic, based on the 1H chart. XAU/USD has been forming the channel down pattern since the first working day of May, while yesterday it finally consolidated under the 200-hour SMA (1,279.85). By falling also below the May 10 minimum at 1,256.72, gold will be exposed to a sharper dive down to the mid-April uptrend around 1,243.
Hourly chart
Seven out of ten SWFX traders are bullish
Meanwhile, OANDA clients are overwhelmingly positive (61%) with respect to gold today, even though they have seen a minor decrease in terms of their portion from 64% on Wednesday. The difference between SAXO Bank's long and short traders tightened to only four percentage points by the May 12 morning, although the majority is still preserved by the former.