- Share of long open trades is down from 54% to 53%
- Bulls are targeting 1,155 (100-day SMA) after crossing 2014 low
- Bearish interim goals are Aug 26/27 lows at 1,117
- Economic events to watch in the next 24 hours: Euro zone PPI (Jul); Spanish Unemployment Change (Aug); US ADP Employment Change (Aug), Non-Farm Productivity (Q2), Crude Oil Inventories (Aug 21) and Factory Orders (Jul); UK Construction PMI (Aug); Australian Trade Balance (Jul) and Retail Sales (Jul)
On Wednesday gold is declining for the first time in four days as market participants weighed signs of the Chinese economy's slowdown and prospects for interest rate increase in the US. The odds of a rate hike at the Fed's September meeting are 32% compared with 40% a month ago, while the probability of a move in December stands currently at 59%. Higher rates tend to sap the allure of the precious metal as it does not pay interest or offer returns. Meanwhile, holdings in gold-backed exchange-traded funds increased to the highest level in a month on August 28 after dropping to the lowest in more than six years on August 11.
Meanwhile, activity in the US manufacturing sector slowed in August to the weakest level in more than two years, while construction spending surged to the highest level in more than seven years. According to the Institute for Supply Management, the index of national factory activity dropped to 51.1 from 52.7 in July, hitting the lowest since May 2013. Economists, however, had expected 52.6. The new orders sub-index plunged to 51.7 from 56.5 and also marked the lowest level since May 2013.
Upcoming fundamentals: US ADP employment data as a benchmark for Fed in September
The most important statistical data release today is considered to be the US ADP Employment change at 12:15 GMT. Markets estimate the indicator to show an increase of 204,000 jobs in August, up from 185,000 in July. Moreover, both US factory orders and crude oil inventories are due at 14:00 and 14:30 GMT, respectively. The former is assumed to grow by 0.8% in July, while oil stockpiles will probably register one additional decline for the week ended Aug 21.
XAU/USD failed to overcome weekly PP
Gold attempted to advance higher on Tuesday, but any gains were capped by the weekly pivot point at 1,140. In case bulls and unable to push the price above this resistance of medium difficulty, then a decline is going to be the main scenario in the near term. However, bears will have other obstacles to face on their way down including monthly pivot point, 55-day SMA and 2014 low in the range of 1,131-26. In case of success, we see the downtrend extending down to 1,117 (Aug 26). However, this development will largely depend on today's US fundamentals, namely the ADP employment change and factory orders.Daily chart
In the one-hour chart the precious metal returned back below the 200-hour moving average, after spending just 18 hours above this line. However, it is too early to claim that a plunge is now inevitable. We are looking at the 2014 low (1,131), with any possible movement in the direction or even beyond this level in the next 24 hours.
Hourly chart
SWFX sentiment remains marginally bullish
In the meantime, OANDA share of bulls is staying at 64.52% of all current positions at the moment, while SAXO Bank traders are keeping as many as 64% of long open trades.