- Bullish majority remains unreliable; their share went up just from 51% to 52% yesterday
- Important support is offered by the Aug high at 1,170
- Daily technical indicators continue giving neutral signals for gold
- Economic events to watch in the next 24 hours: US Crude Oil Inventories (Oct 16); FOMC Member Powell Speaks; UK Public Sector Net Borrowing (Sep); BOE Governor Carney Speaks; BOC Interest Rate Decision, Rate Statement and Press Conference
Gold rose for a second session in a row on Wednesday, snapping a three-day losing streak amid weaker US Dollar. The yellow metal received a support from the Euro, which gained versus the US Dollar, bolstered by strong economic data and comments from ECB officials suggesting additional monetary easing may not be imminent. A weaker Greenback makes dollar-denominated bullion cheaper for holders of other currencies, while also boosting its appeal as a hedge. Investors are awaiting the Fed's monetary policy meeting next week for more clues on an interest rate hike.
Meanwhile, the value of Canada's wholesale trade unexpectedly declined in August as sales dropped in sectors including machinery and motor vehicles, Statistics Canada reported. Sales ticked down 0.1% to C$55.3 billion, while July's flat result was revised to a 0.1% decrease. In volume terms, August wholesale sales declined 0.5%. Four sectors dropped, accounting for 72% of wholesale trade. The machinery, equipment and supplies sector fell 2.4% to the lowest level since April 2014, while the motor vehicle and parts sector edged lower 1.2%. Meanwhile, wholesale inventories soared to the highest dollar value on record, climbing 0.6% to C$73.2 billion, with gains being led by personal and household goods as well as machinery, equipment and supplies.
Among other regions, the number of US housing starts surprisingly rose in September, while building permits dropped more than expected. According to the Commerce Department, housing starts surged 6.5% to a seasonally adjusted 1.206 million units in September, following the previous month's total of 1.132 million units. Analysts, however, had predicted a figure of 1.140 million. At the same time, the number of building permits issued in September plunged 5.0% to a seasonally adjusted 1.103 million units, compared with August's 1.170 million. A strong increase in employment over the past year, coupled with very low mortgage rates and gradually easing lending standards, have underpinned demand for new dwellings.
Upcoming fundamentals: Bank of Canada to make rate decision today
The main attention of markets will be turned to the Bank of Canada's meeting on Wednesday. Monetary policy officials will make an interest rate verdict at 14:00 GMT, and markets see the key overnight rate holding steady at 0.5%. However, the following press conference of BOC Governor and Senior Deputy Governor may give more insight into the future plans of the regulator. Apart from Canada, the UK public sector borrowing data is due at 8:30 GMT today, which may show a September's net deficit of 9.1 billion pounds, down from 11.3 billion pounds a month before. Meanwhile, the Bank of England's Governor is going to speak in Oxford today.
Aug high provides strong support for gold
In the beginning of Tuesday the yellow metal was actively testing the Aug high at 1,170, while a decline below this mark could expose the next demand as low as 1,155. However, the bullion revived later in the day to show confident gains up to the 200-day SMA at 1,175. Any movements around the long term moving average are important; however, we should observe a climb beyond 1,181 (monthly R2) in order to rehabilitate bullish expectations. A bounce back is therefore not completely off the table at the moment.Daily chart
Gold has been developing in parallel to the 200-hour SMA in the one-hour chart on Tuesday. Persistence of such trend may drive the price up to 1,184/86 throughout Wednesday. On the other hand, the Oct 15-20 downtrend line risks derailing the advance already around 1,180.
Hourly chart
SWFX sentiment improved slightly during Tuesday
Meanwhile, OANDA's distribution between bulls and bears is perfectly neutral in the morning on Wednesday. At the same time, 55% (57% yesterday) of SAXO Bank clients continue to assume that the precious metal is going to gain value.