- The gap between bulls and bears has narrowed down to six percentage points
- A supply cluster at 1,084 was erased; focus is now on 1,100 and 100-day SMA at 1,108
- Daily studies are still mixed on aggregate; RSI indicates that gold is becoming overbought
- Economic events to watch in the next 24 hours: German Retail Sales (Nov) and Factory Orders (Nov); Euro zone Consumer Confidence (Dec), Retail Sales (Nov) and Unemployment Rate (Nov); ECB Monetary Policy Meeting Accounts; US Unemployment Claims (Jan 1) and Natural Gas Reserves (Jan 1); Swiss Foreign Currency Reserves (Dec); Bank of Canada Governor Poloz Speaks; Canadian Ivey PMI (Dec); Australian Retail Sales (Nov)
Gold rose above $1,100 an ounce for the first time in nine weeks on Thursday as investors have been looking for safety amid a global stock market turbulence, concerns over China's economy and elevated geopolitical tensions. China's shares plunged 7% on Thursday after less than half an hour trading, prompting a close of Shanghai and Shenzhen stock markets for the rest of the day. Moreover, North Korea announced a successful test of its powerful nuclear bomb on Wednesday, thereby escalating tensions in the Korean peninsula. The announcement came just days after tensions flared in the Middle East.
Meeting minutes of the FOMC's crucial December meeting, when the US central bank made a unanimous historic decision to hike interest rates for the first time in almost a decade, showed that central bankers believed economic activity expanded at a moderate pace. While net exports remained weak, consumer and business spending was solid, while the housing sector improved further. Policy makers expected that with gradual adjustments of monetary policy, economic activity would continue to expand at a moderate pace. However, the Fed expressed concerns over inflation in the near term, saying that recent declines in energy prices and the persistent strength of the US Dollar would exert additional downward pressure. Still, the Committee predicted inflation to reach the target of 2% in 2018, with gradual gains in the coming years. Inflation has been below the Fed goal for more than three years. Meanwhile, the US labour market continues to improve, with private-sector creating 257,000 jobs in December, the strongest gain since December 2014. The Fed expects the jobs market to strengthen further. The ADP employment change data came ahead of the government's December payrolls on Friday. Economists predict employers likely added 200,000 workers last month.
Australia's housing construction lost some steam, as building approvals for new homes suffered their biggest decline in more than three years. The number of approvals for homes, apartments and townhouses plunged by 12.7% in November, according to the Australian Bureau of Statistics. In contrast, economists had predicted a 3.0% decline in consents. Measured on an annual basis, approvals dropped 8.3% in November, following a 12.3% advance a month earlier. Australia's construction sector has enjoyed a solid run over the last few years, with strong house-price inflation and ultra-low interest rates boosting demand for housing. However, over the last few months demand started to wane in the wake of policy changes aimed at calming investors' activity in the housing market and supporting the financial system. A separate report showed Australia's trade deficit shrank in November to $2.9 billion from a revised $3.25 billion in October. Exports climbed a seasonally adjusted 1% to $26.76 billion in November, driven by a 15% increase in rural goods exports such as fruit and vegetables. At the same time, imports dropped 1% in the reported month to $29.67 billion. The data suggested trade would not contribute much to Australia's GDP growth in the fourth quarter compared to the September quarter, when exports added 1.5 percentage points to economic output.
Upcoming fundamentals: BOC governor to speak as economy suffers from low oil prices
Following a steep depreciation of the Canadian Dollar in recent times and persistent weakness in oil prices, the Canadian economy is set to perform worse than it had been initially estimated in 2016. This is putting extra pressure on the Bank of Canada, which could be forced to cut the benchmark interest rate. Governor Stephen Poloz is expected to speak today in Ottawa, meaning market participants will be waiting for any hints of a downward move for interest rates. Meanwhile, Australian retail sales for November will be out at 0:30 GMT on Friday. Analysts foresee an increase of 0.4% on a monthly basis, which will follow an improvement of 0.5% in October.
Gold skyrockets to probe 1,100
A rally for the bullion is taking place for a fourth consecutive day on Thursday. Yesterday we saw the sharpest climb in a month, after prices went through two vital resistance areas near 1,085 and 1,091. The first obstacle was more important, as it was reinforced by 55-day SMA, weekly R2 and monthly R1. Now the main focus is turning to the psychological level of $1,100 per ounce. It is guarded by the monthly R2 and 100-day SMA around 1,108, followed by the monthly R3 at 1,127. Nonetheless, the daily RSI indicator is already assuming the precious metal is somewhat overbought at the moment.Daily chart
Along with eroding the round level of 1,100, the yellow metal is also approaching the October 2015 low at 1,104. A success here will pave the way for a rally in the direction of last September's high at 1,157.
Hourly chart
Bulls cut their market share down to 53%
Alongside, the share of bullish transactions at SAXO Bank slumped by as many as seven percentage points during the session on Wednesday, as their traders attempted to get rid of long positions after gold's rally. Now only 60% of them are set to go long on the bullion, down from 67% yesterday. Despite that, OANDA bullish portion remains firmly positive at 72% in the morning of Thursday.