- 69% of all open positions are long
- Rallies to find resistance above 1,210
- Major demand is at 1,200
- Upcoming events: Italy Trade Balance (Jan), ECB President Mario Draghi's Speech in Brussels, Federal Reserve Chair Janet Yellen's Speech in US Congress (Day 2), US New Home Sales (Jan), Switzerland UBS Consumption Indicator (Jan), UK BBA Mortgage Approvals (Jan), New Zealand Trade Balance (Jan)
Gold bounced back from the lowest level in seven weeks to above $1,200 an ounce on Wednesday, as the Federal Reserve Chairwoman Janet Yellen took a flexible approach to interest rate hike. Yellen said that while central bankers welcome recent economic growth, there is still room for improvement. Thus, a rate hike is not likely for at least next couple of FOMC meetings. Moreover, the precious metal received support from return of China, one of the world's top gold consumers, after a week-long Lunar New Year celebration.
Meanwhile, business activity in the US services sector grew in February at the fastest pace since October. According to Markit, the preliminary PMI for services sector climbed to 57.0 in the reported month, up from the final reading of 54.2 in January. The index has been above the 50.0-mark threshold for sixteen straight months, but the latest reading signalled that the rate of services sector output growth was still much weaker than the highs seen in mid-2014. A separate report from the Conference Board showed consumer confidence index retreated in February from the highest level in more than seven years a month earlier. The index of consumer confidence came in at 96.4 in the measured month, following the upwardly revised 103.8 reading in January, the highest since August 2007.
New Zealand trade balance and US new homes sales expected to worsen in January
Judging from average market expectations, both trade balance and new homes sales data in New Zealand in the United States are estimated to show deterioration for a month of January.XAU/USD struggles to breach 1,200
On January 22, the level at 1,300 which acted as a strong supply for Gold forced the yellow metal to resume declining. Moreover, the bullion succeeded in consolidating below 1,250 during the second week of February, following a day of considerable decline in price on February 6. Taking into account strength of US fundamental factors and potential positive effects from the expanded asset purchases programme in the Eurozone, the long-term outlook for Gold is remaining fairly bearish. Even though some medium-term bullishness can be created by a major level at 1,200, the precious metal is likely to develop below this level in course of March. Moreover, in case of consolidation below the 2013 low at 1,180, a drop down to 2014 low at 1,130 will be broadly expected to take place toward the end of April.Daily chart
The downward momentum gold has been developing since mid-January is having trouble pushing the price beyond 1,200. Even though the daily and monthly studies are largely pointing down, the monthly S1 and the round level stand their ground. If this demand area is not broken, XAU/USD will have a good chance to recover back to 1,250 (monthly PP and 200-day SMA), from where it can attempt to launch an attack on the major down-trend at 1,290. Still, the base case scenario is a close beneath 1,200 and a re-test of the 2013 low at 1,180.
Hourly chart
Bulls sentiment dominates
A little less but a majority of the OANDA and SAXO Bank traders is also long the previous metal. Canadian-based foreign exchange company reports that 63% of traders are long. At the same time, 62% of positions open at SAXO Bank are long.