Gold to develop in the direction of 1,070

Source: Dukascopy Bank SA
  • Portion of bulls cooled down from 73% to 71% by Friday morning
  • All eyes on Euro area's GDP numbers and US retail sales today
  • Five out of eight daily technical indicators recommend selling the precious metal
  • Economic events to watch in the next 24 hours: French, Italian and German GDP (Q3); Spanish CPI (Oct); Italian CPI (Oct); Euro zone GDP (Q3) and Trade Balance (Sep); US Retail Sales (Oct), PPI (Oct) and Reuters/Michigan Consumer Sentiment Index (Nov); Swiss PPI (Oct)

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Four commodities, which are included in our review, were literally unchanged in their value on Thursday. Gold and natural gas were down by 0.1 and 0.13%%, while corn and silver lost 0.14% and 0.21%, respectively. The only noticeable changes were posted by oil prices, which continued to slide down by more than 2.5% yesterday. Crude dipped by 2.75% and is trading around $41.51 at the moment. Alongside, Brent crashed even more by 3.82% to hover at $44.05 on Friday morning. Losses were booked on the back of worries over global medium term supply and demand mismatches, while US oil reserves increased more than initially forecasted for the week ended November 5. On the other hand, ANZ analysts suggest that "oil stocks should start to decline in December once the refinery operating rate increases to 95% (five year average) from the current 89.5%."

Meanwhile, gold continued to decline, trading close to its lowest level in almost six years on Friday amid increasing expectations the Fed would raise US interest rates next month. Assets of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell to 661.94 tonnes on Thursday, the lowest since September 2008. Fed officials explicitly supported a possible December rate hike. With a rate hike this year now seen as very likely, the focus is shifting towards the pace of lifts.

Fed officials supported a possible December interest rate hike with one key policy maker saying the risk of waiting too long was now in balance with the risk of moving too soon to raise rates. With a rate hike this year now seen as very likely, the focus is shifting towards the pace of lifts. St. Louis Fed President James Bullard said that the pace would depend on the state of the world's number one economy and should not be seen as a steady path higher. Bullard believed growth would be strong, and the jobless rate should slip into the 4% range. At the same time, a key ally of Fed Chair Janet Yellen, New York President William Dudley, said that he saw the pace of tightening to be quite gradual. With regards to the US inflation, consumer price growth was predicted to accelerate to 1.5%, from 1.3%, as pressures related to the strong Greenback and low energy prices subside, Fed Vice Chair Stanley Fischer said. The US Dollar has gained about 15% since mid-2015 as the Fed was preparing markets for a rate hike, other major central banks added stimulus, and as investors crowded into US-denominated assets in the face of slowdowns elsewhere.


Andy Haldane, the Bank of England's chief economist, argued against an interest rate hike in the near future as wage growth fizzled and the outlook for the global economy remained uncertain. Haldane reiterated his view that the central bank's next move might be even a rate cut rather than lift as the UK economy appeared to be losing steam. Haldane, considered to be the most cautious policy maker when it comes to the timing of an interest rate hike, had previously warned that the global economy might be heading into a new crisis triggered by slower growth in emerging markets. The economist also talked about the structural changes within the British labour market and its effect on productivity, wage growth and the overall economy. The MPC was surprised about weak wage growth relative to the overall strength of the nation's economy and tightening labour market.

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Upcoming fundamentals: All eyes on US and EU important fundamentals



Many countries of the Euro area will release their GDP data on Friday. Numbers are going to show, whether expansion pace is slowing down and whether additional monetary stimulus from the European Central Bank is necessary. US statistical authorities will publish retail sales and producer price index for October at 13:30 GMT, followed by consumer sentiment index for November at 15:00 GMT. The latter is calculated by the University of Michigan and Reuters, and it is estimated to grow from 90 to 91.5 points. Retail sales are also forecasted to climb 0.3-0.4% on a monthly basis, while producer prices are highly likely to continue slumping by more than one full percentage point on year-to-year basis.


Gold to develop in the direction of 1,070

Yesterday the bullion made an attempt to slump towards July low at 1,070. The price decreased as low as 1,074 by the end of trading, following hawkish comments from FOMC members Lacker, Bullard and Dudley. Upcoming US retail data may expose this year's current low, which is strengthened by the weekly S1 at 1,068. Rising trading volume means volatility seems to be increasing as we are nearing the most important day of this week in terms of fundamentals. Meanwhile, daily indicators are supporting the downward case for gold.

Daily chart
© Dukascopy Bank SA

In spite of broadly horizontal trading throughout this working week, our expectations have a bearish bias for both short and medium term. Gold will be driven by some portion of impactful US data on Friday, while 200-hour SMA at 1,100 may help the bullion to continue posting new monthly lows below 1,080.

Hourly chart
© Dukascopy Bank SA

SWFX bullish share softened to 71%

Market sentiment with respect to gold remains strong positive for the moment, being that 71% of SWFX traders are holding long positions. This translates into a two percentage point decrease in the past 24 hours, down from 73% yesterday.

Meantime, OANDA's long traders continue holding more than three out of every four open positions at the moment, namely 76.51% in the morning on Friday. Additionally, almost 70% (74% yesterday) of SAXO Bank clients preserve their positive stance with respect to gold.















Spreads (avg,pip) / Trading volume / Volatility


Average expectation among market participants for the end of February 2016 is 1,130

Meanwhile, traders, who were asked regarding their longer-term views on gold between Oct 13 and Nov 13 expect, on average, to see the metal around 1,130 by the end of next year's February. At the same time, 57% of participants believe the price will generally below 1,150 in ninety days. Alongside, 32% of those surveyed reckon the price will trade in the range between 1,150 and 1,300 throughout the next three months.

© Dukascopy Bank SA

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