- Trades to buy the yellow metal are back to 55% after spending one day slightly lower at 54%
- Global markets' turmoil is set to anchor gold prices in the foreseeable future
- Short-term technical indicators are projecting a rebound for gold prices for the second day in a row
- Economic events to watch in the next 24 hours: German Real GDP Growth (2015); Italian Industrial Output (Nov); Eurogroup Meeting; EBC Monetary Policy Meeting Accounts; US Unemployment Claims (Jan 8); FOMC Member Bullard Speaks; BOE Monetary Policy Decisions, Vote Distribution and Monetary Policy Summary; Canadian HPI (Nov); Chinese Foreign Direct Investment (Dec); Australian Home Loans (Nov)
Gold dropped on Thursday following gains in the previous trading session, which was caused by falling global stock markets and weakness in the Greenback. The intensifying slide in oil and worries over China's economy have shacked equity markets. Chicago Federal Reserve Bank President Charles Evans said he was concerned about the potential effects of China's slowdown on the world's number one economy.
Japan's core machinery orders plunged the most in 18 months in November following strong increases in previous months, adding to uncertainty over the outlook as domestic demand remains sluggish, while China's downturn dims global growth prospects. Core orders, a leading indicator of business investment, dropped 14.4% on month, compared with economists' expectations for a 7.9% decline. In annual terms, orders increased 1.2%. China's slowdown and plunging oil prices rattled global markets at the beginning of the year, fuelling concerns of deepening slowdown in the world economy and potentially dimming confidence at Japanese companies. Uncertainty over the outlook could lead Japanese firm to further postpone implementing their spending plans. Companies surveyed by the Cabinet Office have predicted core orders would rebound to a 2.9% increase in the final three months of 2015, after a 10% decline in the prior quarter. The BoJ has predicted capital investment will surge 8% in the fiscal year ending March, but recent data show it grew only at a pace of 1-2% in April-September. The world's third biggest economy narrowly escaped a recession in July-September. It is expected to continue moderate growth in the last quarter, but some economists highlighted the risk of a contraction due to weak consumption and slack capital spending.
The US labour market continued to tighten as job openings rose, while the quits rate remained steady, supporting the Fed on the path to normalizing monetary policy. US companies are struggling to fill a higher number of job vacancies than in much of the past 12 years. Many workers hesitate to quit their job, signalling Americans remained concerned about employment prospects even with 5% jobless rate. The number of vacant positions climbed to 5.43 million in November following a downwardly revised 5.35 million openings a month earlier, according to the Labor Department. The number of openings increased from 4.89 million a year ago, after having reached a record-high of 5.67 million in summer. The JOLT report followed a series of other labour market indicators, which pointed to some improvement in the market. Last week, the monthly jobs report showed almost 300,000 jobs were created in December. Furthermore, the report showed companies hired a total 5.2 million workers in November, compared with 5.17 million a month earlier. The hires rate held at 3.6%, where it has been steady since hitting the high of the current business cycle at 3.7% in June. Meanwhile, the quits rate was steady at 2% in November, shy of its pre-recession peak of 2.3% reached in November 2006, when almost 3.1 million quits were registered.
Upcoming fundamentals: BOE rate decision expected to have dovish implications
The Bank of England is going to be in the centre of attention on another Super Thursday, even without the press conference of Mark Carney, the Governor. Recent strength of the Pound and weakness across the Euro zone and China are increasing the risks for UK economic growth, while lower oil prices are weighing on inflation and wage growth is cooling down. The BOE is forecasted to release a soft decision and comments today at 12:00 GMT, but Ian McCafferty is still foreseen to vote in favour of hiking the key interest rate by 25 basis points from the current level of 0.50%. Besides the Bank of England, there are many other economic events to watch during US session, including unemployment claims data release at 13:30 GMT and speech from the FOMC member James Bullard at the same time. St. Louis Fed President and an FOMC voting member in 2016 is going to talk at the Economic Club of Memphis.
Gold meets resistance at 1,092 as correction is looming
The precious metal bounced off a strong 1,084 support cluster yesterday, while nearing the weekly pivot point at 1,092 by the end of Wednesday trading. Such a move was mainly prompted by reversed gains on stock markets across the world. More uncertainty should support gold in the mid-term, as the bulls could try to reclaim the 1,100 psychological mark. This scenario is encouraged by daily technical indicators. Otherwise, however, the bears are still setting eye on 20/55-day SMAs and the monthly R1 at 1,084/79.Daily chart
In the one-hour chart we are dealing with much more uncertainty with respect to gold prices. On the one hand, inside the bearish channel pattern XAU/USD is likely to correct lower in the nearest future with the target area around 1,076. On the other hand, both 200-hour SMA and December 2015 high will try to put bullish pressure on gold. Development of the next 24 hours will be assumed to determine future tendency for prices.
Hourly chart