- SWFX sentiment remains flat at 54% in favour of bulls
- Breaking 1,140/38 would allow for losses down to 1,126 and 1,116 in the medium term
- Daily technical indicators are undecided on Monday
- Economic events to watch in the next 24 hours: Spanish, Italian, French, German and Euro zone Manufacturing PMI (Oct); US ISM Manufacturing PMI (Oct) and Construction Spending (Sep), Swiss Retail Sales (Sep); UK Manufacturing PMI (Oct); RBA Interest Rate Decision and Rate Statement
Gold declined to the lowest level in four weeks on Monday, extending losses into a fourth session in a row amid speculation the Fed would raise interest rates this year. Reflecting investors' concerns, assets in SPDR Gold Trust, the top gold-backed exchange-traded fund, decreased 0.3% to 692.26 tonnes on Friday. Traders have been selling bullion since the US central bank surprised with an explicit reference to its next policy meeting as a possibility for the first rate increase in nearly a decade. As a result, the precious metal posted its worst weekly decline in nine weeks on Friday.
Meanwhile, China's manufacturing activity declined in October, but at a slower pace than expected. The preliminary Caixin China manufacturing PMI rose to 48.3 in the reported month, beating economists' expectations for 47.5 and up from a final reading of 47.2 in September, which was the lowest level since March 2009. A reading above the 50-mark threshold indicates expansion in the sector, while below signals contraction. At the same time, China's official manufacturing PMI contracted in October for a third consecutive month. The gauge came in at 49.8 in the measured month, missing market expectations of 50.0, according to the National Bureau of Statistics. New export orders dropped for a 13th month in a row, whereas the sub-index for new orders, a bellwether for both domestic and foreign demand, rose marginally to 50.3, compared with September's 50.2.
Canada's economy expanded for a third month in August, rebounding from an oil shock that pulled the nation toward recession in the first half of this year. Canada's gross domestic product rose 0.1% in the reported month, following a 0.3% in July, according to Statistics Canada. Measured on an annual basis, the Canadian economy grew 0.9% in August, compared with a downwardly revised 0.7% growth a month earlier. The declines earlier in the year were primarily driven by the energy sector, which was undermined badly by the oil price plunge, first in exploration and then in extraction. The volume of oil and gas output increased 0.3% in August, following gains of 2.6% and 3.9% in June and July respectively. It sat 6.5% higher than a year earlier but was still below February's peak.
Upcoming fundamentals: UK production PMI, RBA rate decision
UK manufacturing industry has probably continued to develop in October, albeit at a somewhat slower pace than in the preceding month. The PMI indicator is estimated to come in at 51.3 points, down from 51.5 points in September. The industry has recently been suffering from low productivity growth and high value of the Pound Sterling. In the meantime, the Reserve Bank of Australia is unlikely to change interest rates at its meeting on Tuesday morning. Currently the Cash Rate equals to 2%, but the regulator's officials were admitting a further softening of monetary policy is possible in the future amid low levels of inflation.
Gold to take another shot at 55/100-day SMAs
On Friday the bullion decided to continue trading with somewhat bearish bias, but no decisive attempts to breach 55 and 100-day moving averages took place. In the morning on Monday, however, gold slumped down to 1,134 (Oct 6 low), but has recovered since then. We are waiting for additional attempts to violate this important support at 1,140/38. A success here would expose the lower Bollinger band and weekly S1 (1,126) first, which are followed by the Jul-Oct uptrend at 1,116. The latter level seems to be sustainable enough, in order to provide XAU/USD with another mid-term bullish momentum.Daily chart
Bearish expectations are confirmed by the one-hour chart, where the precious metal failed at the weekly downtrend, currently at 1,147. Moreover, we suggest that additional pressure will shortly start coming from the 200-hour SMA at 1,162.
Hourly chart
SWFX market sentiment stagnates again
OANDA's positive market sentiment continues to improve further, while the total number of their long open positions rose from 60% to 62.5% over the weekend. In addition, 58% (60% on Friday) of SAXO Bank clients also preserve their positive stance with respect to XAU/USD.