Gold prepares for US jobs data, stays at 1,105

Source: Dukascopy Bank SA
  • Bullish market share rises from 54% to 55%
  • Core attention switches to payrolls statistics as Dollar bulls set eye on 1,100
  • Daily technical indicators are mixed on both daily and weekly bases
  • Economic events to watch in the next 24 hours: German Industrial Production (Sep); French Trade Balance (Sep); US Non-Farm Payrolls, Unemployment Rate and Average Hourly Earnings (Oct); FOMC Member Brainard Speaks; UK Manufacturing Production (Sep), Trade Balance (Sep) and NIESR GDP Estimate (Oct); Canadian Net Change in Employment and Unemployment Rate (Oct)

© Dukascopy Bank SA
Commodities were losing value in the majority of cases yesterday. There was only one positive performer, which showed a surprising 4.5% growth. Natural gas storage in the US increased much less than expected for the week ended Oct 30, according to report from US Energy Information Administration. Precious metals were those commodities to lose the least value on Thursday as gold and silver were down by 0.4% and 0.7%, respectively. These two components are especially vulnerable to the upcoming jobs report from the world's most powerful economy, while traders foresee a healthy 181,000 jump in employment in October. Meantime, weak international demand and oversupply is driving oil prices to the downside. Yesterday Crude and Brent tumbled by 2.4% and 1.2%, correspondingly. A stronger US Dollar before non-farm payrolls is also helping bears, because commodities traded in American currency become more expensive for those paying in other currencies.

Gold traded near the lowest level in eight weeks on Friday and was set to record its biggest weekly decline since July, as investors are awaiting a US interest rate hike this year, pulling funds out money out of the precious metal's funds. Assets in SPDR Gold Trust, the top gold-backed exchange-traded fund, plunged to 671.77 tonnes, the lowest level since mid-August. On Thursday alone, the fund saw outflows of 8.34 tonnes, the biggest daily decline since July 17. Investors will be closely watching US payrolls data later in the session for more hints on whether the economy is ready to weather the first rate hike in almost a decade.

Meanwhile, the Reserve Bank of Australia reiterated its view that interest-rate reductions this year and the Aussie Dollar's depreciation are supporting growth, suggesting rates are likely to remain on hold. Nevertheless, the central bank said that recent inflation data provided room to ease monetary policy further if needed. Traders are pricing in a 25% chance of a rate reduction at the December meeting, climbing to an almost 60% in February. In its quarterly policy outlook, the RBA predicted that underlying inflation would remain at the floor of the 2%-3% target range for most of next year. The Australian economy is predicted to grow by 2% to 3% in the year through June 2016, accelerating to 2.75% to 3.75% in the year through June 2017. In the 12 months through December 2017 economic output is seen increasing by 3% to 4%.


Bank of Japan Governor Haruhiko Kuroda reassured that the central bank would not hesitate to adjust monetary policy if needed to achieve 2% inflation target. Even though the slowdown in emerging markets, particularly in China, affected Japan's exports and production, Kuroda believes that the fundamentals of the world's third biggest economy remain sound and the environment surrounding companies and households has markedly improved. The estimated real economic growth rate for fiscal 2015 was downgraded to 1.2% compared with the expected 1.7% in the July 2015 Outlook Report. On the price front, Kuroda voiced optimism that the underlying trend in inflation has steadily improved, excluding the effects of the decrease in energy prices. The BoJ's QQE programme, launched in April 2013, has been exerting the desired effect toward overcoming deflation. Thus, the central bank will continue to pursue its monetary policy settings and solidly keep its accommodative financial conditions.

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Upcoming fundamentals: US, Canadian employment; UK manufacturing and trade



Precious metals will be considerably influenced by employment data from the US on Friday. However, this statistics is not the only one to be published throughout the last trading session of this week. Canadian employers are estimated to have added 9,500 jobs in October, while unemployment rate has probably stayed flat at 7.1%. In Europe, British manufacturing production is projected to rise by 0.4% in September, following a 0.5% pace of growth posted a month before. Additionally, UK trade balance may improve from a deficit of 11.1 billion pounds in August to 10.7 billion pounds in September, while the NIESR research institute will publish its forecast for the country's economic growth during the three months through October.


Gold prepares for US jobs data, stays at 1,105

Gold's losing streak was prolonged through the seventh consecutive day on Thursday, already pricing in the approaching employment report from the world's largest economy. Key target for bears remains the 1,100 mark, which is strengthened by the monthly S1. Another long term support is offered by the Jul low at 1,070, but even stronger than expected US numbers are unlikely to push the bullion there immediately. Meanwhile, any disappointment may result in a spike up to the recently breached trend-line at 1,118 and additional gains are also possible up to 1,126 (weekly S1).

Daily chart
© Dukascopy Bank SA

By trading inside the well-pronounced bearish channel since Oct 28, we confirm our negative expectations with respect to the yellow metal. However, a lot is at stake in today's employment report from the US. Market participants consider this data the most important on a monthly basis. Therefore, a violation of any of one-hour trend-line is highly likely in the next 24 hours.

Hourly chart
© Dukascopy Bank SA

SWFX sentiment grows to 55% on Friday

As the metal continues to lose value, even more SWFX traders are fixing profit by closing short open positions. Yesterday the share of bulls added one additional percentage point to 55%, while bears are down even deeper to 45%.

Meantime, OANDA's long traders are gaining even higher market share on day-to-day basis, while the total number of their open positions rose from 73.5 % to 74.7% in 24 hours through Friday morning. On top of that, 77% of SAXO Bank clients preserve their positive stance with respect to gold, no change from yesterday.














Spreads (avg,pip) / Trading volume / Volatility


Average expectation among market participants for the end of February 2016 is 1,180

Meanwhile, traders, who were asked regarding their longer-term views on gold between Oct 6 and Nov 6 expect, on average, to see the metal around 1,180 by the end of next year's February. At the same time, 54% of participants believe the price will generally below 1,200 in ninety days. Alongside, 29% of those surveyed reckon the price will trade in the range between 1,200 and 1,350 throughout the next three months.

© Dukascopy Bank SA

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