- An overwhelming majority of the market participants (72%) continues to hold long positions on gold
- Outlook is negative as long as resistance at 1,100 is intact
- The most probable move is to the downside towards the weekly S1
- Average forecast for the end of October is 1,144
- Upcoming events: FOMC Statement, Pending Homes Sales, Crude Oil Inventories
© Bloomberg
Gold traded in a narrow range just below $1,100 an ounce on Wednesday, as investors awaited FOMC statement later in the day for more clues on the timing of interest rate hike. Central bankers are expected to provide more signals that a US interest rate increase is certain this year as the US economy gains momentum. The Fed is likely to lift rates for the first time in almost a decade as early as September, analysts predict, suggesting more downside risk for non-interest yielding bullion.
Meanwhile, holdings of the world's biggest gold-backed exchange-traded-fund, SPDR Gold Trust, remained unchanged at 21.87 million ounces on Monday, the lowest level since September 2008, following a seven-day decline.
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Gold to be driven by the US data
Volatility should be greatly elevated around 6 p.m. GMT, while Pending Homes Sales and Crude Oil Inventories that are to be published earlier today are likely to have only a limited effect on the price despite the figures.
Read More: Fundamental Analysis
XAU/USD: risks skewed to the downside
The market is in a wait-and-see mode before the FOMC statement, but later in the day we are likely to see a spike in the volatility. The most probable move is to the downside towards the weekly S1, while in the longer-term the price is inclined to head in the direction of the 2010 low and 2008 high. This will be the main test of the sustainability of the current bearish momentum. However, an unexpected Fed outcome in the form of a later rate hike is unlikely to leave 1,100 intact. We will then look for a test of the 2014 low at 1,131.Daily chart
© Dukascopy Bank SA
Yesterday we saw no activity in the market, but we nevertheless came closer to the 200-hour SMA and the recently broken falling trend-line, which notably increases the downside risk. The base case scenario after the FOMC statement is a decline towards the 2010 minimum.
Hourly chart
© Dukascopy Bank SA
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Market is net long
Long/short ratios at other brokers are a little lower. For example, 69% of SAXO Bank traders are bullish on gold, while the confidence of OANDA traders is somewhat weaker - 66% of open positions are long.
Spreads (avg,pip) / Trading volume / Volatility
Average forecast for the end of October is 1,144
According to the average forecast, the price of gold is expected to rise up to to 1,144 during the next three months. As for the distribution of forecasts above and below the spot price, at the moment 59% of forecasts are bullish. Most of the forecasts fell into two price ranges: 1,150-1,100 and 1,100-1,050. Both intervals collected 15% of the votes. © Dukascopy Bank SA