- Share of long trades stays flat at 56%
- Bulls to try avoiding gold consolidation below 1,125 support cluster
- Bearish next interim target lies at 1,113
- Economic events to watch in the next 24 hours: Jackson Hole Symposium (Day 1); German Import Price Index (Jul); French Business Climate (Aug); Spanish Revised GDP (Q2); Euro zone M3 Money Supply (Jul); US Unemployment Claims (Aug 22), Prelim GDP (Q2), Personal Consumption (Q2) and Pending Home Sales (Jul); Japanese Retail Sales (Jul), Household Spending (Jul), Unemployment Rate (Jul) and National CPI (Jul)
Gold stabilized on Thursday after the biggest decline in five weeks in the previous trading session as equity markets recovered. However, comments from New York Fed President William Dudley provided some support to the precious metal. Dudley said that prospects of interest rate hike in September "seems less compelling" given the recent market turmoil, hinting that fears of China's economy slowdown are impacting US monetary policy. However, Dudley warned about overreacting to "short-term" market volatility and kept the door open to raising rates during Fed's meeting on September 16-17. Investors will be awaiting key US data later in the day for more clues on the rate hike timing, including a second estimate for second-quarter GDP as well as weekly jobless claims.
Meanwhile, the People's Bank of China injected 140 billion yuan into China's economy on Wednesday, in latest attempt to prop up slowing economic growth, fuelling investors' concerns over a "hard landing". The PBoC injected billions of yuan into the interbank money market through a short-term liquidity operation. The central bank introduced SLOs in 2013 as a supplement of its monetary policy tools in a bid to smooth fluctuations in liquidity and stabilize interbank funding costs. In addition to that, the central bank cut the one-year benchmark bank lending rate by 25 basis points and reserve requirements by 50 basis points for most big banks.
Upcoming fundamentals: Japanese household spending to rebound in July
Japan will release several important fundamental indicators on Thursday including household spending and inflation. While the former is estimated to rebound noticeably by 0.9% in July after a 2% drop in a preceding month, the CPI gauge has probably slumped back into deflation territory of -0.2% due to falling oil prices and sluggish economic recovery. Meanwhile, inflation and other topical problems are going to be discussed at Jackson Hole Symposium in Wyoming, US organised by the Federal Reserve Bank of Kansas City. There leading economists and central bankers are going to join the annual meeting.
XAU/USD closes below demand zone at 1,125/31
Bearish correction and a third straight day of losses pushed the price of the bullion below the most important support area at 1,131/25, where the XAU/USD rate closed Wednesday evening. In case bears keep the cross there on Thursday, the near-term outlook is going to worsen substantially and the bearish trend will be estimated to continue. Short traders may focus on recent lows and the monthly pivot point at 1,113, which is followed by the long term downtrend/psychological level at 1,100. Meanwhile, daily technical studies are now giving signals to sell the precious metal.Daily chart
Bearish outlook for the bullion is also being confirmed by the one-hour chart, where the price has just fallen below the 200-hour SMA. From the perspective of technical analysis, gold has got around 24 hours to return back above 1,135 in order to keep a possibility of growth in the mid-term. However, this scenario looks quite unlikely right now.
Hourly chart
SWFX sentiment seems to consolidate below 60%
In the meantime, OANDA share of bulls is staying at 59.24% of all current positions at the moment, while SAXO Bank traders are keeping as many as 62% of long open trades.