- Share of long trades at 12-week low of 52%
- Bulls are focusing on 2014 low/55-day SMA at 1,131
- Key demand is still provided by monthly pivot point at 1,113
- Economic events to watch in the next 24 hours: Euro zone Current Account and Construction Output (Jun), US CPI (Jul), Crude Oil Inventories (Aug 15) and FOMC Meeting Minutes
The yellow metal has also continued to trade in a tight range on Wednesday as investors awaited the minutes of the Fed's meeting in July for clues on whether the central bank will hike interest rates at its monetary policy meeting in September. Recent slew of upbeat economic data, including a recovery in the housing sector, an improving job market, suggest the Fed is set to raise rates this year. However, some experts believe the US central bank may adopt a gradual approach after the first rate hike, following China's unexpected Yuan devaluation last week.
Meanwhile, US housing starts rose to the highest level since October 2007 in July, adding to further signs of economic improvement in the world's biggest economy. Groundreaking inched up 0.2% to a seasonally adjusted annual pace of 1.21 million units, according to the Commerce Department. Moreover, June's data was revised sharply higher to a 1.20 million-unit rate from the previously estimated 1.17 million-unit pace. Housing starts have been above one million for four months in a row. The upbeat housing data added to sturdy payrolls, retail sales and industrial production reports in suggesting the US economy started the third quarter on a firm footing.
Upcoming fundamentals: US CPI, oil inventories and FOMC minutes to be released on Aug 19
Wednesday of this week is an important day in terms of US fundamentals. At first, the US Department of Labour will announce inflation changes in the month of July at 12:30 GMT, as consumer prices are forecasted to have increased by 0.2% on an annual headline basis and added 1.8% on a core basis. Later on, analysts see oil crude oil inventories decreasing 400,000 barrels for the week ended Aug 15. In the meantime, FOMC meeting minutes are due at 18:00 GMT, as economists are ready to receive any information on whether the Fed is going to raise the federal funds rate the next month.
XAU/USD fails after testing support at 1,110
Growth issues in China are positively weighing on the price of gold. The bullion's bears have made an attempt to penetrate their nearest demand, but have failed to overcome the weekly pivot point and 20-day SMA at 1,110. As a result, it closed Tuesday trading above 1,115. Signals among daily technical indicators are fairly optimistic. Being that the area up to 1,131 is free of any technical levels, it is possible bulls will try to go as high as this mark by the end of this week. However, the mid-term outlook is bearish, as 55-day SMA and Bollinger band at 1,135 are unlikely to let bulls succeed.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 1,110.
Hourly chart
SWFX sentiment at 12-week low
In the meantime, OANDA share of bulls stays at 62% of all current positions, while SAXO Bank traders are also firmly optimistic towards gold at the moment, as there are 60% of bullish trades opened by Wednesday morning.