- Share of long trades is unchanged at 55%
- 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: US Housing Starts and Building Permits (Jul), UK CPI (Jul), Japanese Trade Balance (Jul)
Gold traded in a tight range on Tuesday, struggling to move higher as US rate hike looms amid robust economic data. Bullion ended a seven-week losing streak last week as Beijing's devaluation of the Yuan spurred some safe-haven bids. With China's currency since stabilising, market focus has turned back to a looming hike in US rates.
Meanwhile, US homebuilders' sentiment rose to the highest level in almost a decade this month, suggesting growing confidence in a gradually improving housing market. The housing market index climbed to 61 in August, the highest since November 2005, up from 60 the previous two months, the National Association of Home Builders/Wells Fargo reported. A reading above the 50-mark threshold indicates that most builders see conditions in the market as positive. The reading has been positive for the past year, following five months in early 2014, when the index was in negative territory. In June, sales of existing homes surged to their highest since February 2007, while newly built single-family home sales dropped in June by 6.8% to their lowest level since November 2014, as a shortage of inventory drives up prices at an unsustainable pace.
A separate report showed the Federal Reserve Bank of New York's Empire State factory index plummeted to minus 14.9 in August, the lowest level since April 2009. A robust job market and historically low mortgage rates will probably keep underpinning demand for residential real estate, helping home building sector contribute to overall economic growth. Gains in construction will be needed to help offset any slowdown in manufacturing as factories struggle with a strong Dollar and bloated inventories.
Upcoming fundamentals: UK inflation to remain far below BoE target
Both headline and core readings of the UK consumer price index are estimated to stay fully unchanged in July of this year, according to the median analysts' estimates. Numbers will be published at 8:30 GMT today, as they are likely to show the annual inflation at 0% for the month ended July 31, with core reading being flat at 0.8%. It proclaims that both of them are still hovering well below the Bank of England's CPI target of 2%.
Bulls hold gold above monthly PP
The yellow metal was kept afloat by bullish market participants, as they denied an idea of sending the bullion below a strong support zone at 1,109-1,113. This demand is reinforced not only by the monthly and weekly pivot points, but also by the 20-day SMA, which is quickly nearing these technical levels. Despite that, any future gains are also unlikely to be extended far beyond this month's high of 1,127, as the next supply should meet the precious metal around 1,135, where weekly R1 and 2014 low merge with 55-day SMA and upper Bollinger band.Daily chart
The one-hour chart shows a rapid pace of XAU/USD's recent advance in value, even though the growth seems to have stalled around 1,120. Short term gains are possible, as long as the bullion keeps trading above its 200-hour simple moving average, currently at 1,106.
Hourly chart
SWFX sentiment still below 60%
In the meantime, OANDA share of bulls stays at 65.97% of all current positions, while SAXO Bank traders are also firmly optimistic towards gold at the moment, as there are 62% of bullish trades opened by Tuesday morning.