- Portion of SWFX bulls is unchanged at 70%
- Possible consolidation below 1,070 will pave the way towards 2010 low (1,044)
- Aggregate daily technical indicators expect gold to lose value in the next 24 hours
- Economic events to watch in the next 24 hours: German GDP (Q3) and IFO Business Climate (Nov); US Prelim GDP (Q3), Goods Trade Balance (Oct) and CB Consumer Confidence (Nov); Swiss Employment Level (Q3); RBA Governor Stevens Speaks; UK Inflation Report Hearings; BOJ Monetary Policy Meeting Minutes
Gold continued to trade near its lowest level in six years on Tuesday amid a strong Greenback and expectations that the Fed would hike US interest rates in December. Assets in SPDR Gold Trust, the world's top gold-backed exchange-traded fund, plunged to 655.69 tonnes on Monday, hitting the lowest level since September 2008. While the timing of the first US rate hike in almost a decade seems settled, the question remains how fast the Fed will be raising rates. Goldman Sachs predicts the Fed to hike four times next year, raising the federal funds rate by 100 basis points.
Sales of existing homes in the US dropped last month from the second highest level since 2007 as a persistent shortage of properties limited momentum in residential real estate. Nevertheless, the housing market remains on a solid footing, with sales for the whole year set for the best performance in eight years. Thus, housing is expected to take up some of the slack from a chronically sluggish manufacturing sector. US home resales declined by 3.4% to an annualized rate of 5.36 million units in October, against economists' expectations of 5.4 million and down from September's 5.55 million. At the same time the median price of an existing home advanced 5.8% from October 2014 to $219,600 amid tight inventories. The number of previously owned homes for sale fell 2.3% last month from September to 2.14 million, the fewest since March. The weak sales came on heels of data showing a decrease in housing starts in October and a decline in confidence among home builders.
Japan's manufacturing sector continued to improve in November, expanding at the fastest pace in 20 months in November, as output and new export orders rose. The Markit/Nikkei Japan flash manufacturing PMI climbed to a seasonally adjusted 52.8 in November from a final 52.4 in the preceding month. The gauge remained above the 50 –mark threshold that separates growth from contraction for the seventh consecutive month. If the November's preliminary reading is confirmed, it would be the highest since March 2014. The flash reading for output climbed to 53.9 from 52.4 a month earlier, the fast increase since March 2014. At the same time the PMI for new export orders came in at 53.2 in November, compared with the final reading of 52.2 in October.
Upcoming fundamentals: US economy to surge amid inventory cuts
Economists foresee a positive revision for American economic growth indicator in the third quarter of this year. The world's biggest economy was probably boosted by sharper than initially anticipated cuts to business inventories. While Q3 GDP can be upgraded to 2.0% from 1.5%, it proclaims that growth is likely to be weaker in the final three months of 2015. However, Deutsche Bank analysts suggest the US economy will climb by 2.3% and will again overshoot average projections. Meantime, inventories are one of the most volatile components of the GDP and the pace of economic expansion can be significantly influenced by the change in the pace of inventory creation. Another important intraday fundamental indicator from the US will be the consumer confidence index released by Conference Board. Experts predict the reading to jump from 97.6 to 99.3 points in November, which is going to be a positive signal for overall consumer spending.
Gold treads water around July low
Yesterday the bullion was pushed below July low at 1,070. However, on Tuesday gold observes another round of purchases, which try to raise the price above the above mentioned technical level. Therefore, current short term estimates remains rather uncertain. Any gains are likely to be capped by the weekly pivot point at 1,080. Medium term forecasts have a more pronounced bearish bias and the short traders are eventually aiming at breaching the five-year low at 1,044.Daily chart
Gold's trading range is narrowing in the one-hour chart, meaning we are dealing with the triangle pattern. As a typical continuation pattern, we are waiting for an eventual downward break-out. Before that, some gains are still possible up to the 1,080 area where the closest supply is offered by 200-hour SMA and Nov 16-20 trend-line.
Hourly chart
SWFX bulls secure their 70% market share
The yellow metal is overbought in both OANDA and SAXO Bank markets. The former's clients are holding 77.21% of bullish open trades, while SAXO Bank traders are long in 74.70% of all cases. Bears are quite likely to use this distribution in their favour in the foreseeable future.