- Marginal bullish majority (51%) is unchanged for three days
- Decline below 1,170 may trigger losses down to 1,155
- Daily technical indicators are giving neutral signals for gold
- Economic events to watch in the next 24 hours: Euro zone Current Account (Aug); US Housing Starts and Building Permits (Sep); FOMC Members Powell and Dudley Speak; Fed Chair Yellen Speaks; Canadian Wholesale Sales (Aug); BOE Governor Carney Speaks; Japanese Trade Balance (Sep); MPC Member McCafferty Speaks
As for gold, it continued to slide for the fourth consecutive trading session on Tuesday in the light of a strong US Dollar and fears the Fed remains on track to hike interest rates this year. The US central bank holds two more policy meetings in the remainder of the year: next week and in December. Market expectations for a rate increase have shifted to 2016 in recent weeks. However, some market participants have not completely ruled out a hike in December. Moreover, as the Fed is moving closely to ensure its dual mandate of stable prices and maximum employment is met, it should raise interest rates in the near future despite strong headwinds from overseas, San Francisco Fed President John Williams said.
Meanwhile, the Reserve Bank of Australia reiterated its view that a weak Australian Dollar and record low interest rates helped to rebalance the nation's economy and strengthen the labour market. Even though the central bank expected a period of sluggish economic activity ahead, meaning monetary policy is likely to stay loose for some time, the RBA looked to be in no mood to cut interest rates, the minutes of its October 6 policy meeting showed. The key risks to financial stability and to the Australian's economy overall revolve around developments in an overheated property market. House prices in major cities like Sydney and Melbourne have surged sharply over the last year, triggered by speculative investment, low interest rates and robust demand from overseas buyers. The RBA warned about an imbalance in lending and risks of potential house price falls.
Upcoming fundamentals: BOE's Carney to testify before Parliament
Governor of the Bank of England Mark Carney is expected to testify on the Bank of England Bill before the UK Parliament's Treasury Select Committee at 10:00 GMT on Tuesday. Before that, the MPC member Ian McCafferty who voted to increase interest rates in September and October will also speak in London today. Among core fundamentals, Canadian wholesale sales are forecasted to add 0.2% in August, following no change in the preceding month. Alongside, both US building permits and housing starts are due to hold flat around 1.17 million in September.
Gold to test reliability of Aug high
The precious metal continues losing value for a fourth consecutive day on Tuesday. Yesterday the metal dipped below the 200-day SMA, but held above the Aug high at 1,170. Today a violation of the latter level is highly likely, noting prevailing bearish sentiment in the market. A fall below the 1,170 will be expected to cause additional losses in the foreseeable future. The next target area for short traders is placed at 1,155/53, where weekly S1 merges with the 20-day SMA. Meanwhile, extra demand is offered by the monthly R1 at 1,147.Daily chart
Despite a gradual decrease in value, gold is still trading above the 200-hour SMA, currently at 1,166. The price is currently located in a tight range between this level and Aug high. Negative risks, however, are increasingly influencing the price at the moment.
Hourly chart
Distribution of SWFX positions is unchanged for a third day
Meanwhile, OANDA's share of the longs slipped from 49% to 47.5% in the past 24 hours, extending losses from 57% seen 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.