Gold remains supported by weekly S1

Source: Dukascopy Bank SA
  • Opened positions for Gold are strongly positive (74% bullish / 26% bearish)
  • It is possible that Gold will grow in price, with the closest resistance for it located at 1,205
  • At the same time, the probability of a downside movement exists as well, while for that purpose the closest support is placed at 1,193
  • Upcoming events: Swiss Trade Balance, German Ifo Business Climate, UK Retail Sales, US Unemployment Claims and Philly Fed Manufacturing Index

© Dukascopy Bank SA
Yesterday, the yellow metal was rather volatile in terms of price changes, as at first mostly negative data on European PMI indicators pushed the Gold to trade higher, while later optimistic German and US statistics made the bullion to decrease in price. All in all, in the day-time it gained 0.32% and used to be the best performer among main commodities. Crude oil followed with a rise of 0.04%. On the other hand, silver and natural gas plummeted 2.72% and 2.69%, respectively.

Gold steadied at just slightly below $1,200 an ounce yesterday ahead of the FOMC's two-day policy meeting outcome, which may hint at a timing of interest rates hike. Investors were also watching closely developments in Russia, where the Ruble dived more than 11% versus the Greenback on Tuesday despite an unexpected interest rate hike to 17% up from 10.5% by the nation's central bank. The rate increase was the largest in 16 years. Analysts are weighing whether Russia would sell its gold holdings to finance spending, which may cause a further downside pressure on bullion.

Meanwhile, US housing starts and building permits dropped in November, but the underlying trend points to consistently improving housing market, albeit the recovery appears to be uneven. Groundbreaking declined 1.6% in November from the preceding month to a seasonally adjusted annual rate of 1.028 million units, the Commerce Department reported. October's housing starts were revised up to a pace of 1.045 million units. Meanwhile, building permits, a leading indicator of construction, dropped 5.2% to 1.035 million in November.

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Data from Europe to have most influence on Gold on Thursday

Even though all statistical data on Thursday will be rather equally divided between Europe and North America, we would assume the former to be more important in terms of impact on the price of the yellow metal. German Ifo Institute will release its monthly index for business climate in the country, which is expected to advance for the second consecutive month. Moreover, there will be the retail sales data published in the UK. Among other news, Swiss trade balance is projected to decrease surplus in November, while flash services PMI in the Unites States will most probably show the continuous strength of the world's biggest economy.


XAU/USD returns back below down-trend

The XAU/USD cross has breached the most important resistance line, represented by the long-term downtrend and developed above this level for the past week. However, on December 15 Gold returned back, mostly amid fundamental factors. At the moment the most considerable resistance is represented by this long-term downtrend line, which is currently located at $1,205 and strengthened by the monthly R1 and 55-day SMA. Nevertheless, by the end of the year we are still suggesting Gold to depreciate and trade in the direction of the monthly pivot point at $1,168.

Daily chart
© Dukascopy Bank SA

On Tuesday, the price of Gold was very volatile. During some points of time the bullion managed to climb even above the weekly pivot point, which is located at $1,215. However, fundamental factors pushed it back to trade lower, which resulted in the closure just above the weekly S1 at $1,197. As daily technical studies support the sideways movement, we would suggest Gold to hover around $1,200 in the nearest future.

Hourly chart
© Dukascopy Bank SA
Read More: Technical Analysis

Long opened positions stay almost unchanged at 74%

The gap between long and short positions for Gold on the SWFX market was just little changed in course of last 24 hours, as the bulls are still holding the confident majority of all trades, namely 74% of them. SaxoGroup and OANDA sentiment, however, improved noticeably. At the moment traders of the former expect the bullion to gain value in 56% of all cases, while OANDA market participants are even more optimistic with 61% of long positions opened.
















Spreads (avg,pip) / Trading volume / Volatility


Traders, who were asked regarding their longer-term views on XAU/USD between Nov 17 and Dec 17 expect, on average, to see the pair just below 1,200 by the mid-March. At the same time, 45% of them believe Gold will be above this mark in three months, while one third of traders surveyed forecast the bullion to trade in the range between 1,050 and 1,200.
© Dukascopy Bank SA

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