- Fed uncertainty failed to shift SWFX sentiment (62% bullish/38% bearish)
- Bulls are aiming at monthly PP (1,086), while the price holds above key demand at 1,070 (July low)
- Technical indicators suppose the precious metal will depreciate this week
- Economic events to watch in the next 24 hours: Italian CPI (Nov); Euro zone Industrial Production (Oct); Australian HPI (Q3); RBA Meeting Minutes
Gold rose on Monday, but any upside potential was limited due to the Fed's crucial policy meeting, when the US interest rates are expected to be hiked for the first time in nearly decade. Assets in the world's biggest gold ETF, SPDR Gold Trust, remain at their lowest level since September 2008 amid investor outflows. Market participants fear higher rates could undermine demand for non-interest-paying bullion, while supporting the US Dollar. The precious metal has already dropped 9% for the year, its third consecutive annual fall, in anticipation of a rate increase.
Americans increased their spending in November, signalling enough momentum in the world's number one economy for the Fed to hike rates as soon as this week for the first time in almost a decade. According to the Commerce Department, retail sales excluding automobiles, gasoline, building materials and food services climbed 0.6% following an unrevised 0.2% growth in October. The core retail sales correspond most closely with the consumer spending component of GDP. Overall retail sales climbed 0.2% last month as automobile sales declined, while cheaper gasoline affected receipts at service stations. Auto sales fell 0.4% in November, the biggest decrease since June, after dropping 0.3% in October. At the same time, receipts at service stations declined 0.8% following a 1.0% slide in October. A separate report showed, US producer prices for final demand climbed 0.3% in November, the biggest increase in five months. In the twelve month through November, wholesale dropped 1.1%, compared with a 1.6% decrease in October. Fed policy makers are expected to hike interest rates at their meeting this week for the first time in nearly a decade, resting on a much-improved labour market but without strong evidence inflation is firming.
China's industrial production increased more than expected in November, suggesting government stimulus measures may be starting to drive a mild recovery in the world's second biggest economy. Output at factories, utilities and mines surged 6.2% last month from a year earlier, marking the first rise since August and a significant advance from October's figure of 5.6%, according to the National Bureau of Statistics. Furthermore, fixed asset investment came in also stronger than predicted, surging 10.2% year-on-year in the January to November period, unchanged from the January to October period. At the same time, retail sales increased 11.2% in November from a year ago, accelerating from the annual 11% rise in October. The positive November data suggest Beijing may still be on track to reach its 7% growth target for 2015. The world's second biggest economy has struggled to gather steam over the last year, with manufacturing activity falling for the most of 2015, exports dropping sharply in recent months, and inflation easing to multi-years lows. In response to the weakening economy, the People's Bank of China has cut interest rates six times since November 2014 and lowered required bank reserves several times, freeing up more money to lend.
Upcoming fundamentals: Silent Monday to prepare markets for busy Tuesday
All fundamentals published on Monday are going to create little market turbulence in the next 24 hours. Meeting minutes from the Reserve Bank of Australia will be out at 0:30 GMT on Tuesday. They will most probably confirm a more hawkish stance among RBA's policymakers, which has already been earlier expressed by the Governor Glenn Stevens. Alongside, there is a busy Tuesday approaching and investors are refocusing their attention to events later in the week.
Gold is supported by July low ahead of FOMC days
Price movements ranged from 1,062 to 1,079 on Friday of the previous week. Nevertheless, neither bulls nor bears managed to get control into their hands, meaning gold was practically flat by the end of the trading day around the 1,074 mark. At first, it proclaims that July low (1,070) keeps the bullion under pressure. Additionally, 20-day SMA allows no climb anywhere above 1,076. We see the volatility reading increasing later this week, especially before the Fed meeting. Core bullish target is the monthly PP at 1,086, while the bears are looking at 1,062 (weekly S1; Bollinger band).Daily chart
US Dollar's depreciation, following the retail trade statistics, was positive for the yellow metal on Friday. In the one-hour chart XAU/USD returned back into the old triangle pattern, while crossing 200-hour SMA at the same time. Current development adds to uncertainty, as the post-Fed market reaction is not predetermined in advance.
Hourly chart
SWFX longs stay at 62% after the weekend
Meanwhile, sentiment among OANDA and SAXO Bank clients also remains broadly positive with respect to gold. Long positions continue to account for more than 70% of all trades. OANDA market participants are 74.22% bullish on the metal, while the positive reading for SAXO Bank is 70.59% on Monday morning.