- The SWFX market is becoming less optimistic regarding the bullish potential
- Rallies to find resistance above 1,210
- Major demand is at 1,200
- Upcoming events: US (Core) CPI (Jan), Unemployment Claims, (Core) Durable Goods Orders (Jan), FOMC Member Lockhart Speech
Gold continued to rise for a second consecutive day as Chinese buyers returned from the seven-day Lunar New Year holiday, while comments from the Fed Chairwoman Janet Yellen raised speculation among investors that the US central bank will begin raising interest rates later than expected this year. Testifying before the House of Representatives' Financial Services Committee on Wednesday Yellen did not provide any additional details on the timing of a rate hike. A day earlier Yellen told the Senate Banking Committee that while the Fed would consider rate increases on a "meeting-by-meeting basis", a lift-off was unlikely to happen for at least next couple of meetings.
Sales of new US single-family homes declined less than expected in January, while supply increased to the highest level since 2010. The Commerce Department reported that sales slid 0.2% to a seasonally adjusted annual rate of 481,000 units. December's sales were revised up to 482,000 units, the highest level since June 2008, from 481,000 units. Analysts, however, had expected a pullback to 471,000 units. Compared to the same period last year, sales rose 5.3%. Activity in the housing sector has remained sluggish since hitting a speed bump in the second half of 2013 as limited home inventories and higher prices put off first-time buyers, against the backdrop of weak wage growth. It has hindered the overall economy, even though mortgage rates have dropped dramatically from their 2013 peaks. Recent data also showed a plunge in existing home sales in January and softer single-family housing starts and permits.
Decline in CPI to accelerate
The value of US Durable Goods Orders is expected to increase by 1.7% after a 3.3% contraction a month earlier. However, the main event for gold traders will be the change in the price level in the United States, which is estimated to decline at a higher pace than before, by 0.6% in January after 0.4% in December.XAU/USD well-supported at 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
XAU/USD is currently extending Wednesday's rally from 1,200, but it may encounter fierce resistance between 1,215.80 and 1,211.90, where the weekly PP merges with the 100-day SMA. If this area fails as a ceiling, another high concentration of selling orders is supposed to be near 1,226, where the weekly R1 joins forces with the 20- and 55-day SMAs. Meanwhile, taking into account the monthly technical indicators, the overall bias with respect to gold is bearish, meaning 1,200 is unlikely to remain the lower boundary of the trading range in the long run.
Hourly chart
Mixed changes in long/short ratios across brokers
The opposite tendency was observed among the SAXO Bank and OANDA traders. In the first case the portion of long positions advanced from 62 to 65%. The change at OANDA was even more significant, from 63 to 67%, indicating growing demand but at the same time increasing risk of gold being overbought.