- Share of long open trades at 60% for the first time in 28 days
- Prices to be increasingly volatile after the Fed decision
- No Fed hike may push gold up to the 1,150 area
- Economic events to watch in the next 24 hours: FOMC Interest Rate Decision and Press Conference; ECB Economic Bulletin; US Housing Starts and Building Permits (Aug); SNB Interest Rate Decision; UK Retail Sales (Aug)
Gold traded near its one-week high on Thursday, extending overnight gains, as tepid US inflation data eased fears the Fed would raise interest rates later today. Expectations that the US central bank would hike rates on Thursday had already been lowered amid recent concerns over slowing economic growth in China and volatility in financial markets. Moreover, the latest data showed consumer prices in the US declined in August as cheaper gasoline kept inflation below the targeted level of the Fed. The US consumer price index dropped 0.1%, the first decline since January, following a mere 0.1% gain in July.
Among other fundamentals, Canada's manufacturing sales rose for the third straight month in July, supported by increased sales in the motor vehicle parts and assembly industries. Factory sales increased 1.7%, beating economists' expectations for a gain of 1.0%. Figures for May and June also were revised higher. In volume terms, sales rose 1.1% in the reported month. Higher sales in vehicles and parts accounted for nearly two-thirds of the overall increase. Parts sales soared 12.1%, while sales in the vehicle assembly sector surged 5.6%. Meanwhile, inventories climbed 1.1%, driven by the transportation equipment industry. The inventory-to-sales ratio, which measures how long it would take to deplete stockpiles if sales were to stay at their current levels, stayed unchanged at 1.40 in July. In terms of future sales, unfilled orders rose 2.7%, while new orders jumped 10.2%.
Upcoming fundamentals: SNB rate decision to be overshadowed by Fed
President of the Swiss National Bank Thomas Jordan noted earlier that there is still room for manoeuvre in terms of changing interest rates. However, economists are convinced the SNB will not change the stance today when rates are announced at 7:30 GMT. Moreover, this event will be overshadowed by the Federal Reserve meeting later in the day at 18:00 GMT. Here, markets assume the US central bank is unlikely to move in September, but volatility is forecasted to surge by the time of announcement.
Gold climbs past 1,118 on Wednesday, waits for Fed decision
The precious metal decided to act decisively one day before the Federal Reserve makes a decision on interest rates. With implied probability for Fed Funds being as low as 33%, gold appreciated amid weakness of the US Dollar. XAU/USD skyrocketed above the weekly pivot point and 20/55-day SMAs to close the trading session at 1,120. There are two scenarios for Thursday and both depend on the Fed decision. A rate hike will be able to return the metal even below the 1,100 level, while no change in rates may provide bulls with additional impetus to push the price up to the current September high at 1,148. Meanwhile, daily technical indicators are completely neutral at the moment.Daily chart
After trading along the upper trend-line of the bearish pattern and opposing the idea of moving lower, the gold has finally violated the negative trend and surged above the 1,120 mark. Along with that, the 200-hour SMA (1,112) has also been crossed, and this fact improves our short term outlook towards the yellow metal.
Hourly chart
Bulls reach 60% share for the first time in 28 days
In the meantime, OANDA share of bulls jumped to 67.38% of all positions, while SAXO Bank traders are keeping 65% of long open trades, down two percentage points in the past 24 hours.