- Bears continue to displace bulls from the SWFX market; bullish share dropped down to 64%
- Traders are watching monthly PP at 1,086; any gains above this level should reopen 1,100
- Daily studies see the precious metal higher in the next 24 hours
- Economic events to watch in the next 24 hours: German Industrial Production (Oct); US Labour Market Conditions Index (Nov); FOMC Member Bullard Speaks; UK Halifax HPI (Nov); Swiss Foreign Currency Reserves (Nov); BOE Governor Carney Speaks; Japanese GDP (Q3)
As for gold, it traded near the highest level in three weeks on Monday as renewed Euro strengthens and US Dollar weakness drove further short covering in gold. The Greenback failed to gain much traction following better-than-expected payrolls data. The world's number one economy created 211,000 jobs last month, a solid pace that would help push the economy closer to full employment. Economists had expected the 200,000 increase. The jobless rate remained steady at a seven-year low of 5.0%. Meanwhile, assets in SPDR Gold Trust, the top gold-backed exchange-traded fund, are at their lowest since September 2008.
The market is pricing in almost a 50% chance on an interest cut by the Reserve Bank of New Zealand this Thursday amid a stronger Kiwi Dollar, the weak outlook for inflation, dairy and labour market. The central bank is widely expected to slash the official cash rate by 25 basis points to 2.5%, following three consecutive rate cuts between June and September. Internationally, New Zealand's OCR still remains one of the highest in the developed world.
Meanwhile, the Canadian economy lost 36,000 jobs in November, pushing the unemployment rate higher, Statistics Canada reported. Canada's economy shed the most jobs since April 2009, whereas most analysts had predicted a loss of about 10,000 jobs in November, following an advance of more than 44,000 in the preceding month. Jobs were lost in both private and public sectors during the reported month, down 40,800 and 21,200, respectively, with most of the decreases coming in part-time employment and mainly among those between 15 and 24 years of age. Still, Canada's overall labour force has increased 135,000 positions between January and November this year, compared to 132,600 during the same period last year. The Bank of Canada maintained its key overnight lending rate at 0.5%, highlighting that the domestic economy was adjusting largely as expected to the effects of low prices and other headwinds. The central bank stressed that the nation's economy benefitted from the US economic recovery, weaker Canadian Dollar and the bank's easing policy. Yet, the resource sector remains a problem for Canada's economy, as lower oil prices undermines the economy and business investments are facing major spending cuts in the energy related field.
Upcoming fundamentals: Japanese economy to avoid recession in Q3
Even though initial statistical data revealed that the world's third-largest economy entered the recession territory in the third quarter of this year, economists are now predicting an upward revision to Q3 GDP. The quarterly growth has probably been unchanged, up from a -0.2% decline posted by the preliminary release. On an annual basis, Japan's economy is now projected to increase by 0.1%, up from -0.8% showed by the first estimate. The data is due on Monday at 23:50 GMT. Apart from Japan, market participants are closely watching the upcoming testimony of the Bank of England Governor Mark Carney who is going to speak to the European Parliament Committee on Economic and Monetary Affairs.
Gold spikes towards mid-November highs at 1,085
Disappointment from the ECB was fully priced into gold on Friday. The precious metal surged by around $20 per troy ounce. XAU/USD pierced through the July low to close just below the monthly pivot point at 1,085. We expect some selling pressure to be in place here. Unless the mentioned monthly resistance is crossed to the upside, the short term outlook for the bullion will remain bearish. Otherwise, a rally above 1,086 should allow for the extension of gains in the direction of 100/55-day SMAs at 1,116/18. However, this scenario looks increasingly unlikely by the monthly technicals.Daily chart
While the probability of growth in the daily chart remains quite subdued for the moment, in the one-hour chart the bulls have gained some noticeable advantage over the bears. The bullion climbed above 200-hour SMA and managed to close above this line for the first time after four attempts, which have taken place since mid-November.
Hourly chart
Bullish market share continues to slide down
Despite that, the yellow metal remains heavily overbought in both OANDA and SAXO Bank markets. The former's bullish clients are holding 67.58% (-4%) of all trades, while SAXO Bank traders are gold-long in 71% of the cases.