- Friday losses failed to derail positive market sentiment with respect to gold
- Upcoming EU and US fundamentals are sending bearish signals to the metal
- Daily and weekly technical indicators give no priority to either bulls or bears
- Economic events to watch in the next 24 hours: German Retail Sales (Oct) and CPI (Nov); Italian CPI (Nov); US Pending Home Sales (Oct), Chicago PMI (Nov) and Dallas Fed Manufacturing Index (Nov); UK Mortgage Approvals (Oct) and Consumer Credit (Oct); Canadian Current Account (Q3); Australian Building Permits (Oct) and Current Account Balance (Q3); RBA Rate Statement and Interest Rate Decision; Chinese Caixin and NBS Manufacturing PMIs (Nov) and Non-Manufacturing PMI (Nov); Japanese Nikkei Manufacturing PMI (Nov)
Gold languished near a more than five-year low amid prospects for further divergence in monetary policy between the Fed and ECB, with the US central bank expected to hike interest rates in two weeks, while the ECB is predicted to expand stimulus. The yellow metal is set for a third annual drop as the prospect of higher US borrowing costs supports the US Dollar, denting gold's appeal. On Thursday, the ECB may cut its deposit rate and ramp up its asset-purchase programme to support the region's economy.
British consumer confidence declined to its lowest level in the last six months in November, a survey conducted by GfK on behalf of the EU revealed. The consumer sentiment indicator fell to +1 in November from +2 in the preceding month, while analysts had expected it to remain unchanged in November. The last time the figure reached such a low level was in May. With regards to Britain's economic growth, it demonstrated weak numbers in the third quarter. The second revision to the UK GDP stayed steady at 0.5%, matching market expectations, the Office for National Statistics reported. In the second quarter, the economy grew by 0.7%. Measured in yearly terms, the GDP climbed up by 2.3%. The government's spending accounted for 1.3% quarter-on-quarter, capital expenditure rose by 1.3% on quarter and the total business investments stepped up by 2.2%, beating economists' projections of 1.5%.
Japan's industrial production increased for the second consecutive month in October and retail sales rose more than expected, a sign the world's third biggest economy started to recover from a recession. Factory output climbed 1.4% last month from September's 1.1% gain, driven by general-purpose machinery, cars and electronics. However, on an annual basis production dropped 1.4%, posting the sharpest decline since June. A separate report showed Japan's retail sales rose 1.8% in the year to October, compared with market's forecast of a 0.8% annual increase. The recent data suggests that the Japanese economy is headed for a modest recovery over the current quarter, after it slipped into recession for a second straight quarter. Japan's GDP dropped 0.2% in the July-September period, the same pace of decline as in the second quarter.
Upcoming fundamentals: A busy Monday for statistical data releases worldwide
Even though European and US trading sessions will be little influential in terms of fundamentals on Monday, their job will be overtaken by Asian trading tomorrow morning. Activity in production and non-manufacturing sectors of Chinese economy is first up at 1:00 GMT on Tuesday. Analysts assume that manufacturing industry will continue to experience some growth difficulties. The consensus forecast is 49.9 points for the official reading released by the China Federation of Logistics and Purchasing, while Caixin measure is forecasted to remain flat at 48.3 points. Meantime, Caixin Services PMI might have risen to 53.1 points in November, up from 52 points a month ago. Apart from China, the Reserve Bank of Australia's interest rate decision is the first central bank event of this working week. However, recent announcements by the Governor Glenn Stevens are driving lower the probability of a rate cut this time. The benchmark is estimated to be unchanged at 2.00%.
Gold rout is strengthened by uplifted Dollar
With US markets reopening for shorter-than-usual session on Friday, the traders' focus was shifted back to the Fed December meeting and a busy new week. The bullion was sent down to 1,055 by Friday evening and it eventually confirmed the July low placed at 1,070. Now we are estimating additional losses for the yellow metal. The key support is located at 1,044 (2010 low), which will be the main bearish target before Friday US jobs data. Stronger losses should expose the next major demand at 1,031 (2008 high).Daily chart
From the one-hour chart's point of view, XAU/USD has perfectly confirmed a triangle pattern to the downside. This event affirms bearish intentions among market participants who are going to sell the precious metal in the nearest future. US Dollar is highly likely to strengthen after ECB decisions on Thursday and positive labour market statistics on Friday, and this outlook makes gold even less attractive for the moment.
Hourly chart
SWFX bulls secure more than 70% of the market
The yellow metal is also overbought in both OANDA and SAXO Bank markets. The former's clients are holding 73.68% of bullish open trades, while SAXO Bank traders are long in 67.62% (-5%) of all cases.