Gold at two-week low after Fed comments

Source: Dukascopy Bank SA
  • Bullish traders hold their market share at 52%
  • Support of 1,155 may provide temporary bullish momentum for gold
  • Signals given by daily technical indicators are generally gold-positive
  • Economic events to watch in the next 24 hours: Spanish HICP (Oct) and Retail Sales (Sep); German Prelim CPI, Unemployment Change and Unemployment Rate (Oct); Euro zone Business Climate and Consumer Confidence (Oct); US Advance GDP (Q3), Unemployment Claims (Oct 23) and Pending Home Sales (Sep); UK Mortgage Approvals (Sep) and Consumer Credit (Sep); Japanese CPI (Sep) and Unemployment Rate (Sep); Bank Of Japan Interest Rate Decision and Monetary Policy Statement

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Except oil, other commodities were mainly trending downwards on Wednesday. The yellow metal was down by almost one full percentage point, even despite initial gains for this commodity. While silver preserved an increase of 0.4%, the rally was hammered by more hawkish than expected stance from the Federal Reserve yesterday. Now a December rate increase is back on the table, according to analysts' estimates. Meanwhile, oil prices skyrocketed by more than 4.5% in the past 24 hours, following encouraging inventory data which showed an unexpected rise in US stockpiles alongside the low level of production. More precisely, Crude traded up by 6.3% to $45.94 per barrel, while Brent added 4.8% to reach $49.05 by Wednesday evening.

Gold rose on Thursday but remained near its two-week low after the Fed explicitly said that it might hike short-term interest rates in December, downplaying recent global financial market turbulence and saying the US labour market was strengthening despite a slower pace of job growth. Investors will now be closely watching US data, including gross domestic product and jobless claims due later in the day, to gauge the health of the US economy and how it could affect the Fed's policy decision. Holdings in SPDR Gold Trust, the world's top gold-backed exchange-traded fund, declined 0.17% to 694.34 tonnes on Wednesday.

Meanwhile, sales of newly built homes in Australia drooped in September, reversing a solid growth in the preceding month, reinforcing the view the housing market may be losing momentum. Sales plunged 4.0% on month in September, the Housing Industry Association reported, following the 2.3% increase a month earlier. Demand for housing has been supported by ultra-low borrowing costs in recent years, while strong house-price inflation has bolstered incentive to build new homes. Nevertheless, building consents eased in recent months, climbing 5.1% on an annual basis in August, compared with a double-digit growth seen less than a year ago.


The Reserve Bank of New Zealand signalled it is likely to slash interest rates again after it maintained them on hold following three consecutive reductions. The central bank kept rates at 2.75%, admitting that further actions might be required to reach their inflation target. RBNZ Governor Graeme Wheeler is concerned about turning up heat in an already hot Auckland housing market with lower borrowing costs, and also wants to keep ammunition on hand in case the global economic outlook deteriorates. At the same time, a strengthening New Zealand Dollar put Wheeler's attempts to return inflation to the 2% target midpoint for the first time since 2011 in jeopardy. The Kiwi Dollar gained as much as 9% versus the Greenback in the past month amid growing uncertainty over the timing of Fed's interest rate hike and as investors pared bets on an RBNZ rate reduction in October.

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Upcoming fundamentals: Bunch of statistics from Japan



Thursday is expected to be busy in terms of fundamental statistics, which is going to be released all around the world. Apart from American GDP and pending home sales numbers, the focus will be on Japan in the next 24 hours of trading. The world's third largest economy will release labour market and consumer price data at 23:30 GMT and 22:30 GMT, respectively. The jobless rate will most likely stay flat at 3.4%, while the annual inflation is forecasted to dive deeper into red of -0.2% for the month of September. In August the indicator decreased below zero for the first time since April 2013. Later in the night at 3:00 GMT on Friday, the Bank of Japan will make an important interest rate decision. The key rate is, however, going to remain unchanged at 0.10%, while many analysts are see a high probability of additional monetary stimulus to be unveiled by Haruhiko Kuroda today.


Gold slides down from 1,182 to 1,156 after Fed

Markets expected somewhat dovish Fed stance yesterday. A completely opposite outcome of the meeting pushed gold prices considerably to the south. While initially trading with a premium, the bullion's spot dipped down to 1,156 by the end of Wednesday trading and established a new two-week low. A decline was capped by the weekly S1 and the short term expectations assume a recovery from here. Major resistance is created by 1,167/71 area, where a sell-off should resume. A drop below 1,155 is required to affirm our negative projections with respect to gold amid uplifted US Dollar.

Daily chart
© Dukascopy Bank SA

Fed comments crashed the yellow metal's plans to consolidate above the 200-hour SMA, currently at 1,168. Second attempt may take place on Thursday, but that zone is reinforced by other resistances including the 200-day SMA and Aug high.

Hourly chart
© Dukascopy Bank SA

SWFX sentiment unchanged at 52% for seven days

It seems that bulls enjoy holding a slight advantage over bears. The percentage of long open positions has been completely unchanged at 52% since Thursday of the previous week, which gives the bullish traders a 4% lead.

Meanwhile, OANDA's positive market sentiment added less than one percentage point to 55.94% in the past 24 hours. In addition, 56% (57% yesterday) 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 29 and Oct 29 expect, on average, to see the metal around 1,200 by the end of January. Though, 49% of participants believe the price will generally above this mark in ninety days. Alongside, 36% 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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