- Opened positions on gold are strongly bullish (74% long / 26% short)
- The immediate resistance for the yellow metal is currently located at 1,121
- At the same time, the nearby support for the bullion is placed at 1,111
- Important economic events to follow in the next 24 hours: Euro zone Current Account (May), Bundesbank Monthly Report, Canada Wholesales Sales (May), RBA Meeting Minutes
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Gold plunged to the lowest level in five years on Monday amid growing expectations for a US interest rate hike this year, as well as low global inflation. In addition to that, for the first time in six years China, one of the world's biggest gold consumers, released an update on its gold reserves, which appeared to be far lower than expected. At the end of June, China's gold holdings totalled 53.32 million troy ounces, up 57% from the end of April 2009. Yet, the reserves were lower than market participants had expected.
Meanwhile, Canada's annual inflation accelerated in June as food and shelter costs rose, while energy provided less of a drag. The Canadian consumer prices rose 1.0% in the reported month from a year earlier, compared with May's reading of 0.9%, according to Statistics Canada. At the same time, Canada's core inflation rate, which strips out volatile items such as food and energy, climbed 2.3%, slightly beating expectations for a 2.2% gain. June marked the 11th straight month in which the measure stood at 2% or higher.
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Canadian wholesale sales, RBA minutes in focus today
Wholesales sales in Canada are expected to add just 0.1% in May on a monthly basis, following a strong 1.9% advance in the preceding month. The data is due today at 12:30 PM GMT and comes after a surprising rate cut from the Bank of Canada last week. Meanwhile, the Reserve Bank of Australia will publish the minutes of its most recent meeting at 1:30 AM GMT on Tuesday morning. The report may reveal some further indications, whether the regulator will change its monetary policy stance in the nearest future.Read More: Fundamental Analysis
XAU/USD develops inside bearish wedge pattern on daily chart
Since the second quarter of 2013, the bullion has been developing inside the falling wedge pattern, meaning that trading range is decreasing as time goes on. Two pattern's boundaries are represented by the upper trend-line around 1,270 and pattern's support at 1,115. Among recent developments, in March 2015 the yellow metal resumed gaining value, even without touching the lower trend-line, but the growth stalled beneath the 2009 high at 1,230. In the foreseeable future the rally is likely to be limited and the bullion should be driven by the 200-day SMA around 1,200, which has a slight bearish bias. Some short-term gains in the direction of the long-term downtrend (1,270) are not completely off the table, but bears are eventually going to overtake a lead and drive the metal back to the south. The overall negative tendency for gold seems to be the case in the long run, while at the end of this year the precious metal should to consolidate around 1,150, in case the present trend persists.Daily chart
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Friday losses of the bullion down to the 2014 low at 1,131 were completely overshadowed by developments on Monday morning. The metal dropped more than 4%, crossed the long-term downtrend line and touched the 1,071 mark, as positive US fundamentals caused higher activity among bears. At the moment is seems that the metal has returned above the downtrend at 1,109 and a bounce back is not off the table. Daily indicators are giving mixed signals, while some of them (Stochastic) suggest that gold is oversold and there is a good opportunity for buying the precious metal.
Hourly chart
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Read More: Technical Analysis
SWFX sentiment strongly bullish towards gold
Meanwhile, OANDA's bulls are in the safe majority with 69.67% of all current positions, but their share dropped 10% during the weekend time. Nevertheless, this sentiment is still the third most positive among all major crosses at the moment. Saxo Bank market participants are also optimistic towards the precious metal, as there are 68% (-4%) of bullish trades registered in the morning on July 20.
Spreads (avg,pip) / Trading volume / Volatility
Traders, who were asked regarding their longer-term views on XAU/USD between Jun 20 and Jul 20 expect, on average, to see Gold trading just below 1,180 by the end of October. At the same time, 50% of them believe the bullion will be strongly above 1,150 in three months, while 36% of traders surveyed forecast the bullion to trade in the range between 1,000 and 1,150.
© Dukascopy Bank SA