- Bullish market share returns to 57%, the highest level in seven weeks
- Near term movements are likely to remain subdued amid lack of fundamentals
- Five out of eight daily technical indicators are signalling to sell the precious metal
- Economic events to watch in the next 24 hours: German Wholesale Prices (Oct) and 10-y Bond Auction; ECB President Draghi Speaks; UK Claimant Count Change (Oct), Average Hourly Earnings (Sep) and Unemployment Rate (3M-Sep); BOE Governor Carney Speaks; Bank of England Open Forum 2015; Japanese Machinery Orders (Sep); Australian Employment Change/Unemployment Rate (Oct)
Even though gold rose on Wednesday, it remained under pressure near its lowest level in three months amid ongoing outflows from bullion funds and an anticipated US interest rate hike. Assets in SPDR Gold Trust, the world's biggest gold-backed exchange-traded fund (ETF), dropped to 663.43 tonnes on Tuesday, the lowest level since September 2008 when Lehman Brothers filed for bankruptcy spurring the global financial crisis. Gold is headed for a third annual loss as the US economy's recovery from the financial crisis prompts the Fed to normalize its monetary policy.
Meantime, low milk prices and Auckland's soaring housing market remained the key risks to the New Zealand's financial system, while the lower New Zealand Dollar is helping to cushion the nation's economy, the Reserve Bank of New Zealand said. The central bank reported that risks to financial stability increased since May due to build up in Auckland house prices relative to incomes, ongoing weakness in global dairy prices, as well as China's slowdown and its impact on commodity prices. Global dairy prices plunged more than 50% from a peak in early 2014 to mid-2015. Even though prices rebounded around 30% between August and September, they remain well below profitable levels for many New Zealand farmers. Governor Graeme Wheeler has slashed interest rates three times this year as the slump in milk prices curbs economic growth and damps inflation. At the same time he remained concerned that lower borrowing costs could further fuel housing demand in Auckland, where the central bank estimates prices surged almost 27% in the year to September.
China's industrial production and urban fixed investment continued to slow in October, while retail sales rose, suggesting the world's second biggest economy shifted toward greater reliance on consumer consumption as old growth engines faltered. Industrial output, which measures the economy's manufacturing, mining, utilities and other output, increased 5.6% last month from a year earlier, the weakest pace of growth since 2008. The reading missed economists' expectations for a 5.8% gain and came below September's 5.7% rise. Measured on a monthly basis, industrial production climbed 0.46% in October, following a 0.38% gain a month earlier. At the same time, urban fixed investment soared 10.2% in January to October compared to the same period a year earlier, slowing from the 10.3% pace seen previously. Yet, the data beat economists' predictions for a 10.1% gain.
Upcoming fundamentals: Job gains to resume in Australia and to continue Britain
UK labour market statistics is first up at 9:30 GMT on Wednesday. Analysts estimate the claimant count to increase by 1,600 in October, down from 4,600 in September. Labour market is forecasted to keep tightening further, while jobless rate should remain steady at 5.4%. Alongside, wages are projected to continue growing strongly by 3.2% in September, significantly exceeding the current ultra-low inflation level in the country. Meantime, tomorrow morning we are going to wait for Australian employment numbers at 0:30 GMT. The South Pacific country has probably generated 14,800 new jobs in October after a loss of 5,100 one month before. Unemployment rate is projected at 6.2%, no change on a monthly basis.
Gold in wait-and-see mode after Monday gains
We do not project substantial volatility for gold prices in the nearest future, after the metal stabilized and booked first gains in nine days on Monday. Yesterday the price erased those positive changes to return back to 1,089 by the end of trading. Veterans Day and closed markets in the US will most probably keep the yellow metal in the sideways trend today, while more pronounced movements are awaited by Friday when more fundamentals will be published. In the medium term, however, we see gold losing value in the direction of Jul low at 1,070.Daily chart
Judging from the one-hour chart, we may observe a plunge in the short term, being that gold reached the bearish pattern's upper edge. However, mixed outlook for the bullion will most likely result in a formal upward breach of that boundary at 1,090.
Hourly chart
Share of SWFX bulls is back to 57%
Meantime, OANDA's long traders are holding their portion of open positions firmly above the 74% mark for the moment, being that yesterday it advanced from 74.3% to 74.7%. Additionally, almost 74% (70% yesterday) of SAXO Bank clients preserve their positive stance with respect to gold.