Gold closes below Aug high on stronger Dollar

Source: Dukascopy Bank SA
  • Bullish SWFX market share is flat at 52%
  • After breaching Aug high, the next demand is provided by 1,155
  • Daily technical indicators are showing slightly bullish signals at the moment
  • Economic events to watch in the next 24 hours: French Business Climate (Oct); Spanish Unemployment (Q3); Italian Trade Balance (Sep); ECB Interest Rate Decision and Press Conference; US Existing Home Sales (Sep), Unemployment Claims (Oct 16) and Housing Price Index (Aug); Canadian Retail Sales (Aug); UK Retail Sales (Sep)

© Dukascopy Bank SA
Fossil fuel underperformed the most among all major commodities on Wednesday. Natural gas crashed by 2.9%, while oil prices were down in the range between 1.8% and 2.35% amid a spike in US reserves during the last week. Precious metals failed to avoid a decline as well, with gold and silver tumbling by 0.75% and 1.3%, respectively. Metals were pushed considerably to the downside due to rising value of the American Dollar, which began rallying before the upcoming meeting of the Governing Council of the European Central Bank in Malta later today.

Gold traded near the lowest level in over week on Thursday, due to a stronger US Dollar and uncertainty over the timing of Fed's first interest rate hike in a decade. Traders are awaiting U.S. data due later in the day for clues about the strength of the world's number one economy and what effect it could have on the Fed's monetary policy.

Meanwhile, the Bank of Canada left its key overnight lending rate unchanged at 0.5% after cutting it twice this year, saying that nation's economy rebounded as predicted in July. Household spending continued to support economic activity and is projected to increase at a moderate pace. Non-resource sectors benefitted from the stimulative effects of previous monetary policy actions as well as depreciation of the Canadian Dollar. Meanwhile, lower commodity prices lowered Canada's terms of trade and dampened business investment and exports in the resource sector. This prompted the Bank of Canada to modestly downgrade growth forecasts for 2016 and 2017.


The central bank expected the nation's economic output to increase by just over 1.0% in 2015 and 2.0% in 2016, compared with a July forecast of 2.3% growth next year. For 2017, growth is predicted to be 2.5% instead of 2.6%. At the same time, the bank said Canada's inflation evolved in line the BoC's forecasts, remaining near the bottom of the target range. The central bank expected the underlying trend of inflation to continue to be about 1.5% to 1.7%. The BoC predicted the Canadian economy to return to full capacity and inflation sustainably to target around mid-2017. The next scheduled date for announcing the overnight rate target is 2 December 2015.

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Upcoming fundamentals: UK and Canadian retail sales in focus; ECB meets in Malta



There are several important fundamental events scheduled to take place at 12:30 GMT on Thursday. US unemployment claims are forecasted to rise from last week's 255,000 to 265,000 for the week ended Oct 16, while retail sales in Canada have probably risen further in August by around 0.1% month-on-month. Meanwhile, economists project strong gains for retail sector of the UK. September data is due at 8:30 GMT and the annualized pace of growth may accelerate from 3.7% to 4.8% on the back of a monthly increase of 0.4%.


Gold closes below Aug high on stronger Dollar

From the third attempt in three days the bullion has finally closed the daily trading below one of the most important supports, namely the Aug high at 1,170. The short term expectations are therefore shifting considerable to the downside right now as the sell-off may extend down to the 1,155 demand zone soon. There the price is going to meet both 20-day SMA and weekly S1. Additional support is offered by the monthly R1 at 1,147. Meanwhile, a yesterday's decline improved the aggregate signal from daily technical indicators, which changed from neutral to moderately bullish.

Daily chart
© Dukascopy Bank SA

Negative forecasts are underpinned by the gold's one-hour chart, where the yellow metal has fallen below the 200-hour moving average during the past 24 hours. On top of that, the Aug high has also been eventually violated, putting a bearish case on the front page of projections.

Hourly chart
© Dukascopy Bank SA

SWFX sentiment stays marginally bullish

SWFX market sentiment with respect to the precious metal remained broadly unchanged for the past three weeks. Yesterday the bullish share was flat at 52%, and an advantage remains very negligible right now.

Meanwhile, OANDA's market sentiment improved from yesterday and now the bullish share has a small majority of 50.61%. In addition, 53% (55% yesterday and 57% on Tuesday) of SAXO Bank clients continue to assume that the precious metal is going to gain value.
















Spreads (avg,pip) / Trading volume / Volatility


Average forecast for the end of January 2016 is 1,200

Meanwhile, traders, who were asked regarding their longer-term views on gold between Sep 22 and Oct 22 expect, on average, to see the metal around 1,200 by the end of January. Though, 50% of participants believe the price will generally above this mark in ninety days. Alongside, 35% of those surveyed reckon the price will trade in the range between 1,200 and 1,050 by the end of next year's first calendar month.

© Dukascopy Bank SA

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