- Sentiment changed for the first time in seven days, bullish share rose to 54%
- Bears aim to consolidate below 1,147; next goal is to violate 1,140/38 (SMAs)
- Daily technical indicators are undecided, weekly ones are moderately positive
- Economic events to watch in the next 72 hours: Spanish GDP (Q3); Italian CPI (Oct) and Unemployment (Sep); Euro zone CPI (Sep) and Unemployment (Sep); US Personal Spending and Personal Income (Sep), Chicago PMI (Oct); FOMC Member Williams Speaks; Canadian GDP (Aug); Chinese Manufacturing PMI (Sep)
Gold traded near its three-week low on Friday and headed for its worst week in two months amid expectations that the Fed would still hike rates this year. The precious metal surged earlier this month in light of speculation that slowing global economy could prompt the US central bank to postpone its rate hike to next year. However, on Wednesday the Fed surprised with an explicit reference to its December policy meeting as a possibility for the first US rate increase in nearly a decade.
Meanwhile, the Bank of Japan refrained from expanding its massive stimulus programme, hoping the world's third biggest economy can withstand the drag from China's slowdown without extra monetary support. The central bank reiterated its pledge to increase its monetary base at an annual rate of 80 trillion yen. The BoJ said that the decision was made in an eight-to-one vote. However, the BoJ is likely to remain under pressure to step up its already hefty asset-buying scheme as falling energy costs, sluggish exports and a weak recovery in household spending keep inflation considerably below its 2% target. Core consumer prices dropped 0.1% in the 12 months through September, a second monthly decrease, while household spending plunged 1.3% from a year earlier.
In New Zealand, business confidence strengthened in October, as signs of recovery in dairy prices saw companies more confident about their profitability, plans to hire and invest more in their businesses. The ANZ Business Confidence Index rose to 10.5 this month up from –18.9 in September. A reading above zero points to optimism, whereas a reading below zero signals that pessimism prevails. A net 24% of respondents saw their own activity expanding in the coming year, up from a net 17% in September. The New Zealand Dollar gained 60 pips versus the US Dollar following the data release to trade at $0.6731. Earlier in the year a sustained decline in dairy prices, forecasts for dry weather, as well as an absence of inflation saw the Reserve Bank of New Zealand cut the benchmark interest rates three times to 2.75% from 3.5%, and has forced economists to revise downwards their economic outlook. Even though the price for dairy, the country's top export commodity, remains volatile, it has started to show signs of recovery and rebounded from its lows. Nevertheless, economists still predict the central bank to lower the cash rate by a further 25 basis points in December.
Upcoming fundamentals: All eyes on China's industrial activity
Both official and Caixin readings for the Chinese manufacturing PMI will be released in the beginning of next week. Economists suggest no considerable improvement due to overall weakness in the economy. Official manufacturing PMI is projected to rise from 49.8 to 50 points, which divides expansion from contraction in activity. On the other hand, Caixin PMI forecast stays at just 47.5 points at the moment, up from 47.2 points on a monthly basis. Among other Friday fundamentals, Canada's GDP data is due at 12:30 GMT. Monthly economic growth in August might have slowed to 0.1%, down from July's 0.3%.
Gold leaves support eroded at 1,147
US Dollar continued to strengthen at the expense of gold prices on Thursday. XAU/USD slumped below 1,150 and erased the monthly R1/weekly S2 at 1,147/46. The bullion is required to consolidate below both of them and start testing 55/100-day SMAs at 1,140 in the nearest future, in order to underpin medium term bearish expectations. On the other hand, 55-day SMA has just crossed 100-day moving average to the upside, meaning market sentiment is now shifting in favour of bulls. Moreover, weekly studies are sharing bullish views with respect to gold.Daily chart
The one-hour chart is less optimistic on gold perspectives. Yesterday the weekly downtrend was breached, highlighting inability of bulls to limit a decline at 1,150. Additional pressure continues to come from the 200-hour SMA at 1,165 and Aug high at 1,170.
Hourly chart
SWFX sentiment improves on the bullish side
Meanwhile, OANDA's positive market sentiment surged to surpass the 60% by Friday morning, which compares to 56% we observed 24 hours ago. In addition, 60% (56% yesterday) of SAXO Bank clients continue to assume that the precious metal is going to gain value.