- Share of long trades decreased from 59% to 58%
- Bulls are focusing on 2014 low at 1,131
- Key demand is now provided by monthly pivot point at 1,113
- Economic events to watch in the next 24 hours: German, French, Spanish CPI (Jul), ECB Monetary Policy Meeting Accounts, US Retail Sales (Jul) and Unemployment Claims (Aug 7), New Zealand Retail Sales (Q2)
Gold rebounded from multi-year lows to trade at its highest level in almost a month, as investors are starting to push back their expectations for the Fed to raise borrowing costs in September as China's currency devaluation has stoked concerns about China's economic growth and global inflation expectations. Meanwhile, demand for gold dropped to the lowest level in six years in the second quarter, according to the World Gold Council's report, as weak price movement and the prospects of higher returns in equities undermined interest in the metal. Demand plunged 12% to 914.9 tonnes, with drops in China and India making up almost half of the fall.
Meanwhile, China's industrial output, investment and retail data all surprised to the downside, building pressure on an already weakening Yuan. Industrial production rose 6% last month from a year earlier, compared with the 6.8% growth in June and undershooting even the most pessimistic forecasts of economists. Further data released by the National Bureau of Statistics showed retail sales increased 10.5% in July from the previous year, slowing from a 10.6% annual growth in June. At the same time, fixed-asset investment excluding rural households rose 11.2% in the reported month, the slowest pace since 2000.
Upcoming fundamentals: NZ retail sales to keep pressure on RBNZ
The pace of growth in New Zealand's retail sales has probably slowed down considerably in the second quarter of this year. Market expects the data, which will be published at 22:45 GMT, to register a rise of just 0.5% on a quarterly basis, while in January-March sales climbed as much as 2.7%. In case numbers are announced worse than projected, it may raise expectations for further rate cuts from the Reserve Bank.
Bears capitulate as gold grows above 1,120
Uncertainty that is being created by decisions of the PBOC is increasing demand for safe-haven assets. Gold is of them, as it managed to jump in value for a third consecutive day on Wednesday. Yesterday bulls were successful in sending the bullion above three important technical levels, including weekly R2, monthly PP and weekly R3. The next resistance is capable of bringing back the bearish momentum, as a sell-off may begin around the 2014 low at 1,131, which is accompanied by Jul 20 high. Unless this mark is violated, our short-term outlook towards the yellow metal is fairly negative.Daily chart
The one-hour chart is showing a rapid pace of XAU/USD's advance in value. Moreover, this graph indicates that the 2014 low is just within a short distance from the current market price. We see this level to be tested sooner than previously expected, but the future is still unclear. Combined with Jul 20 high, the 1,131 mark may create substantial supply for the bullion.
Hourly chart
SWFX sentiment still below 60%
In the meantime, OANDA share of bulls stays at 62.18% (-5%) of all current positions, while SAXO Bank traders are also firmly optimistic towards gold at the moment, as there are 62% (-6%) of bullish trades opened by Thursday morning.