- More than 70% of SWFX traders continue to hold long positions
- Advantage of bulls is signaling that the metal is too overbought and losses can materialize soon
- Aggregate daily technical indicators are backing the bears today; weekly ones are largely mixed
- Economic events to watch in the next 24 hours: German Import Prices (Oct); French Consumer Spending (Oct); Spanish Flash CPI (Nov); UK Second Estimate GDP (Q3) and Nationwide HPI (Nov)
Gold dropped on Friday as expectations for a hike in US borrowing costs in December continued to support the US Dollar, curbing the precious metal's appeal. Bullion is trading near its lowest levels since February 2010 as market participants weigh the prospects of higher US rates after fundamentals signalled a strengthening economy. Chances of the Fed moving next month are at 72%, up from 50% at the end of October.
Japan's consumer price inflation eased for the third month in a row, while household spending also dropped, putting greater pressure on the Bank of Japan to boost inflation expectations, while the world's third biggest economy is in recession. The disappointing data came despite signs that Japan's labour market remained tight, with the jobless rate at a two-decade low of 3.1%, compared with 3.4% in September. Inflation slid further away from the central bank's 2% goal in October, with the BoJ's preferred gauge, CPI that excludes fresh fruit and energy prices, climbing 0.7% last month following September's 0.9% growth. The national core CPI, which strips out only fruit prices, dropped at a steady pace of 0.1% year-on-year in October. At the same time household spending declined 2.4% last month from a year earlier, against economists' expectations for a 0.1% gain, while disposable income decreased 0.3%.
Private capital expenditure in Australia dropped sharply in the third quarter, driven by renewed weakness in mining investment. Australian firms held back on investing in new capital in the three months through September, signalling business confidence is still weak amid Australia's economic transition away from mining-driven growth. Private capex plummeted a seasonally adjusted 9.2% quarter-on-quarter, marking the biggest decline in more than 15 years, the Australia Bureau of Statistics said. The sharp fall in the July-September period followed the 4.4% decrease in the preceding quarter. Economists, however, had expected a milder decline of 2.8% in the reported period. Mining expenditure plunged 10.4% over the quarter, with spending on buildings and structures tumbling 10.5% and spending on plant and machinery down 9.7%. The fourth estimate for 2015-2016 private capex spending came in at $120.35 billion, revised up from the third estimate of $114.81 billion.
Upcoming fundamentals: UK GDP growth to be affirmed at 0.5%
Policymakers from the Bank of England has recently turned more bearish on economic perspectives of Britain, mainly because of risks from abroad which might dampen exports. Measured quarter-on-quarter, the UK economy advanced by 0.5% in July-September, down from 0.7% in the second quarter of this year. Today the data is highly likely to be confirmed at 0.5% when the second-estimate GDP is out at 9:30 GMT. The average expectation is based on a Bloomberg survey of analysts. Today's reading will include some spending data, which continued to surprise positively in the past couple of months. However, this optimism will be most likely offset by disappointing trade numbers as deficit rose from 5.1 billion pounds in Q2 to 8.5 billion pounds in Q3. Exports-imports gap is widening, partly because of the expensive Pound and poor growth in the Euro zone, the main trading partner of the UK.
Gold sees no value change during Thanksgiving
The bullion was literally unchanged in price on Thursday, which is explained by US Bank Holiday and low volatility in both commodity and FX markets. Price opened and closed just above July low at 1,070. On Friday morning we see some downward activity taking place, but we expect the overall daily trading range to stay quite narrow. In any case, gold is required to trade below July low for two consecutive days, in order to confirm this support. Trading volume crashed 2.5 times since last week's peak and will support light trading in the near term.Daily chart
XAU/USD is currently testing the triangle pattern's lower boundary at 1,069. Being a continuation pattern, this triangle implies an eventual bearish breakout. Additional pressure should be provided by 200-hour SMA, but more active bearish development will have to wait until next week, which is going to be very busy in terms of fundamentals.
Hourly chart
SWFX bulls secure at least 70% of the market
The yellow metal is also overbought in both OANDA and SAXO Bank markets. The former's clients are holding 74.43% of bullish open trades, while SAXO Bank traders are long in 72.59% of all cases. Bears may benefit from this distribution and will try to enter the market with fresh short positions.