- Share of long trades decreased from 58% to 57%
- Bulls to set eyes on 2013 low at 1,178
- Key demand lies at 1,131 (2014 low)
- Economic events to watch in the next 24 hours: US Treasury Bill Auctions, Atlanta Fed President Lockhart Speaks, RBNZ Inflation Expectations (Q3)
The precious metal traded near its highest level in almost seven weeks on Monday as concerns over China's economic slowdown scared investors away from risky assets. Bullion climbed to $1,168.40 on Friday, the highest level since July 7, gaining more than 4% last week. Concerns of a China-driven global economic downturn drove Wall Street to its sharpest one-day decline in nearly four years on Friday due to ongoing weakness in the Chinese manufacturing sector and stock markets.
Meanwhile, Canada's inflation accelerated to the fastest this year in July amid surge in food and automobiles and a weaker drag from lower gasoline prices. Cost of living in Canada increased 1.3% in the measured month from a year before, compared with the June figure of 1.0%, Statistics Canada reported. At the same time, the core rate, which strips out eight volatile components, surged 2.4%. Both gauges came in line with economists' expectations. Automobile prices jumped 2.5% in July from a year earlier, up from 2.0% in June. Food prices soared 3.2% including a 6.1% increase in meat. Gasoline prices, however, declined 12.2% on a 12-month basis in July, less than a 14.1% drop in June, Statistics Canada said. On a monthly basis, total inflation inched up 0.1% in July and the index of core prices remained unchanged.
Upcoming fundamentals: RBNZ to set Q3 inflation forecasts
Consumer price expectations in New Zealand were declining for four consecutive quarters, before rising eventually in the second quarter of 2015. The gauge released by the Reserve Bank of New Zealand inched up to 1.9% in April-June, as it shows likely annual price changes in course of the next two years. There is a high risk the indicator will drop again this time, which may trigger another rate cut from the RBNZ this year.
XAU/USD below 100-day SMA despite volatility
Uplifted volatility of gold prices failed to push the bullion in any direction on Friday, as it stood broadly flat below the 100-day SMA at 1,159. This line represents the nearest support for the precious metal, being strengthened by the monthly R1 from below. However, in case bears decide to act decisively, they should aim at 55-day SMA/2014 low, where short traders failed to prevent a rally on Aug 19-20. On the other hand, bullish short term goal is located in the range between 1,178 (2013 low) and 1,187 (200-day SMA). Technical indicators are in turn showing mixed signals on all time frames at the moment.Daily chart
Horizontal trading that was in place on Friday resulted in a penetration of the lower boundary of a bullish pattern, which has emerged since Aug 19. This event raises additional risks of a sell-off in the foreseeable future. However, fundamentals are still favouring the bullish scenario, while support should be provided by 2014 low/200-hour SMA at 1,131/27.
Hourly chart
SWFX sentiment stays below 60% for nine days
In the meantime, OANDA share of bulls stays at 57% of all current positions, while SAXO Bank traders are also optimistic towards gold at the moment, as there are 62% (+4%) of long trades opened by Monday morning.