- Share of long trades decreased from 61% to 59%
- Long-term bulls to focus on 2014 low at 1,131
- Key demand can still be found around 1,080
- Economic events to watch in the next 24 hours: Euro zone Industrial Production (Jun), US Crude Oil Inventories (Aug 7) and Federal Budget Balance (Jul), Greek Parliament Debt Crisis Vote, UK Claimant Count Change (Jul) and Unemployment Rate (3M-Jul), Japanese Machinery Orders (Jun)
Gold rose for a fifth consecutive session on Wednesday to trade near the highest level in three weeks, benefiting from declines in stocks after China's devaluation of the Yuan fuelled fears of a currency war. The PBoC unexpectedly devalued the Yuan by 2% on Tuesday to bolster China's moribund economy. The decision was criticized by US lawmakers and considered as an unfair attempt to get export advantage. The move hurt global equities, urging some investors to seek safe-haven assets such as gold, which has now gained around 3% from the lowest level in more than five years of $1,077 during a late July rout.
Meanwhile, US non-farm productivity increased at a moderate pace in the second quarter as growth rose, while hiring remained steady. The productivity of nonfarm workers, measured as the output of goods and services per hour worked, climbed at a seasonally adjusted annual rate of 1.3% in the second quarter, according to the Labor Department. Productivity picked up 0.3% in the past year, far below the long-term average of 2.2%. Productivity growth has been weak since the recession, the key reason why the recovery has been sluggish.
Upcoming fundamentals: UK labour market data in perspective
A number of people claiming unemployment benefits in the UK are expected to add 1,400 in July, following a surprising increase of 7,000 back in June. In the meantime, the jobless rate will most probably stay unchanged for the three months through July at 5.6%, while wages are forecasted to grow by 2.8% for the same time period on the annual basis. All these indicators are due on Wednesday by 8:30 GMT.
Bears keep gold below 1,110 despite volatility
Both long and short traders were attempting to lead the gold market in course of yesterday; however, these intentions resulted in failure and eventual stand-off, as the bullion closed just below the weekly R2 at 1,108, some three dollars above the previous day's closing price. Daily technical indicators are mixed for several days in a row, so are the weekly and monthly studies. Therefore, outlook remains broadly neutral, despite possible spikes in turbulence in the foreseeable future.Daily chart
Meanwhile, in the one-hour chart gold seems to have officially established the positive trend, after closing above the long-term downtrend for two consecutive days. As expected yesterday, the price is now moving into the range of 1,110-1,115, where expectations should be changed from neutral to positive. In case this is the case, longs may attempt to reach 1,131 (2014 low) by the middle of next week.
Hourly chart
SWFX sentiment below 60% again
In the meantime, OANDA share of bulls stays at 67% (+4%) of all current positions, while SAXO Bank traders are also firmly optimistic towards gold at the moment, as there are 68% (+3%) of bullish trades opened by Wednesday morning.