- Percentage of bullish positions increased from 65 to 70%
- XAU/USD is capped by the 100-day SMA at 1,215.60
- Concentration of demand is assumed to be at 1,200
- Upcoming events: US GDP (Q4), Chicago PMI, Pending Home Sales, UoM Consumer Sentiment, FOMC Members Dudley and Fischer Speeches
Meanwhile, positive US data and comments from Fed officials a day earlier suggested the that US central bank may head towards an early rate hike this year, contradicting dovish signals from Fed Chair Janet Yellen earlier this week. Gold has declined more than 7% from above $1,300, the highest level in five month reached in January, as expectations of a US rate increase undermined the bullion's safe-haven lure. However, the precious metal has found support at around $1,200 due to firm demand from China, the world's second biggest consumer of gold.
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.
US recovery to slow down
According to the mean forecast for the US GDP, growth in the world's largest economy is expected to decelerate from 2.6 to 2.1%. At the same time, Chicago PMI and Consumer Sentiment as reported by the University of Michigan are also estimated to weaken. Meanwhile, real estate sector is likely to show improvement, as pending home sales are to increase by 2.5% following a 3.7% decrease in December.XAU/USD challenges 100-day SMA
Robin Bhar, head of metals at Societe Generale sees "slight slowdown" in demand for gold. While for the rest of the year Robin expects volumes to be good, he notes that "there is a feeling they are not likely to match year on year gains that we had the last couple of years." Among the major factors for the precious metals market Robin mentions the Fed raising the interest rates, which is expected around the middle of 2015 and onwards. The analyst argues that this event will have a negative impact on gold, as "stronger US monetary policy tends to boost the Dollar and bond yields."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
Despite broad bullishness of the US Dollar on Thursday, the price of gold retained its upward momentum and hit as a result resistance at 1,215.68/1,211.90, created by the 100-day SMA and weekly PP. Although we do not rule out a possibility of XAU/USD closing above the long-term moving average and then targeting supply between 1,226 and 1,227, the correction is expected to end here. The daily and monthly technical indicators are mostly bearish, and a major reversal will probably transpire lower, either at the 2013 low at 1,180.35 or at the 2014 low at 1,131.30.
Hourly chart
Traders are long gold
Preponderance of the bulls over bears at other brokers might not be as distinct, but is nonetheless significant and comparable. OANDA reports that 62% of positions opened by its clients are long. At the same time, 64% of traders at SAXO Bank expect to profit from gold's appreciation.