- Bullish majority is minimal (51%) on Monday
- Price risks falling back below the 200-day SMA
- Both daily and weekly technical indicators are neutral at the moment
- Economic events to watch in the next 24 hours: German Bundesbank Monthly Report; FOMC Members Lacker and Brainard Speak; RBA Meeting Minutes
Gold continued to decline for a third consecutive session on Monday amid robust data on US consumer confidence. The University of Michigan said its consumer sentiment index surged to 92.1 in the reported month from 87.2 in September, whereas economists had expected a modest upturn to 89.0. Investor sentiment towards gold was mixed. Hedge funds and money managers raised their bullish bets in COMEX gold and silver to almost the highest level in five months in the week ended October 13, according to US Commodity Futures Trading Commission data. At the same time holdings at SPDR Gold Trust, the world's biggest gold-backed exchange-traded fund, declined by 0.89% to 693.75 tonnes on Friday, the first drop in nearly two weeks.
Meanwhile, the world's second biggest economy posted its weakest quarterly economic growth since the global financial crisis, building pressure on policy makers to slash interest rates further and deploy additional support measures to avert "hard landing". China's economy expanded by 6.9% on year in the third quarter, slightly better than economists' forecasts for a 6.8%. While better than expectations, growth was still the slowest since the January-March period of 2009, when the economy expanded by 6.2%. China's slowdown has not come as a surprise to policy makers, who have been shifting focus from investment-driven growth to a consumer-led economy over the last few years. However, the extent of the slowdown has fuelled concerns. The Chinese economy grew at its weakest rate in 24 years in 2014, and is set to grow at an even weaker pace this year, likely missing the government's goal of 7%.
Upcoming fundamentals: FOMC members to speak, RBA meeting minutes
Federal Reserve Governor Lael Brainard and President of the Richmond Fed Jeffrey Lacker will both deliver speeches on Monday. The former is due to talk about regulations of the financial industry. Meanwhile, Mr. Lacker who dissented at the most recent Fed meeting in September and voted in favour of raising the target range for the Federal Funds rate will speak at the University of Richmond. With audience questions expected, the speech is likely to attract attention among market participants. Nonetheless, market volatility is not forecasted to be uplifted on Monday.
Gold to fall back below 200-day SMA
XAU/USD held above the crucial technical level on Friday, namely the 200-day SMA at 1,175. However, in the beginning of the new working week the bullion is losing steam and is highly likely to drop below this important support. This fact may embark on a new bearish trend in the foreseeable future, but we should see the Aug high at 1,170 being violated first, before the final outlook decision is made. Bulls' inability to reverse losses should reopen the 1,155/45 zone for bears, where weekly S1, 20-day SMA and monthly R1 are presently located.Daily chart
A slide below the up-trend line confirms bearish expectations for the yellow metal. However, the most important one-hour chart's support line is still ahead of short traders. Unless both Aug high and 200-hour SMA are crossed, a recovery will be possible.
Hourly chart
Distribution of SWFX positions is unchanged from Friday
Meanwhile, OANDA's share of the longs stabilised below 49% over the weekend, after falling down from 57% on Wednesday of the last week. At the same time, SAXO Bank clients continue to assume in the majority (57%) of cases that the precious metal is going to gain value.