- SWFX traders are moderately bullish with respect to gold, namely in 55% of all cases
- Growing risk appetite could support bearish traders in the short run
- Daily technical indicators are still positive for the next 24 hours
- Economic events to watch in the next 24 hours: German CPI (Dec) and ZEW Economic Sentiment (Jan); Euro zone Current Account (Nov) and CPI (Dec); Swiss Producer and Import Prices (Dec); UK CPI and PPI (Dec); BOE Governor Carney Speaks; New Zealand GDT Price Index and CPI (Q4)
Gold was little changed on Tuesday as stock markets were pressured by China's fundamentals, which showed the world's second biggest economy grew at the slowest pace in 25 years in 2015, sending investors towards safe-have assets. In 2015, the Chinese economy expanded at a 6.9% pace, compared with officials' expectations for a 7% growth and down from 7.3% in 2014. In the final quarter of the year, GDP increased 6.8%, compared with September quarter's growth of 6.9%. Yet, sluggish physical demand from top gold consumers China and India limited bullion's upside potential.
China's economy grew at the slowest pace in 25 years in 2015, increasing pressure on Beijing to act to address concerns of prolonged slowdown in the world's second biggest economy. In 2015, the Chinese economy expanded at a 6.9% pace, compared with officials' expectations for a 7% growth and down from 7.3% in 2014. In the final quarter of the year, GDP increased 6.8%, compared with September quarter's growth of 6.9%. To combat slowing growth, the Chinese government has unleashed a slew of easing measures, including interest rate and reserve requirement ration cuts from the PBoC. However, given a sluggish property sector, analysts predict further aggressive actions from officials, particularly in light of the Chinese economy's transition from a manufacturing-based export-reliant model to a more services oriented consumption. Moreover, the world's second biggest economy saw a difficult start to the current year, which included markets closure on two occasions as steep declines of more than 7% triggered market circuit breakers and a halt to trading, sparking jitters through global markets. The International Monetary Fund expects a growth rate of 6.3% for China for both 2016 and 2017, compared with the previous growth forecast of 6.7%.
American shoppers curbed their spending last month, fuelling concerns about the momentum in consumer spending heading into 2016. Sales at retailers declined 0.1% from the previous month to a seasonally adjusted $448.1 billion in December, according to the Commerce Department. Retail sales rose 0.4% in November, compared with an initially reported 0.2% gain. From a year earlier, sales grew just 2.1% in 2015, marking the slowest increase in the six-year expansion. Consumer spending is a key catalyst of the US economic growth, representing more than two-thirds of economic output. Household consumption has helped the world's number one economy grow in recent quarters despite a stronger Dollar and weak demand overseas, which have hit US exporters. A separate report showed US producer prices declined in December, underscoring persistently low inflation. The producer price index, which measures the prices companies receive for goods and services, dropped 0.2% in December, the Labor Department reported. Excluding volatile food and energy categories, core prices inched up 0.1%. Overall producer prices were down 1.0% in December from a year earlier, the 11th consecutive year-over-year decline. Core prices increased 0.3% from a year earlier.
Upcoming fundamentals: BOE's Carney to talk on Tuesday
Being that a second consecutive US trading session will deliver few fundamental indicators, all market attention will be focused on other countries including the Euro zone and Britain. In particular, the Bank of England's Governor Mark Carney is expected to speak today at 12:00 GMT. He will deliver a lecture speech to the Queen Mary University in London. Investors are looking for any dovish comments, which will postpone market expectations for a first rate hike in the UK even further. Tuesday will be an important day for other UK statistical data releases, as December CPI is due at 9:30 GMT. Consumer prices have provably risen by 0.1% on a yearly basis and remained heavily under the BOE aim of 2%.
Gold holds steady after light Monday session
On Monday the bullion has spent its most tranquil trading session this year. Prices of gold were broadly unchanged near the weekly pivot point at 1,089. The bulls decided to wait for more pronounced fundamental impetus, and even Chinese data is failing to move the metal during the Asian session on Tuesday. More events are scheduled for Wed-Fri, and disappointment there should encourage gold purchases with the bullish target at 1,100. In the next 24 hours, however, trading is likely to keep balance between the long and short market participants.Daily chart
Despite pushing the gold price below 200-hour SMA in the one-hour chart, the bears are probably lacking confidence for the moment to put at risk much lower levels. At first, we need to see XAU/USD closing below last month's high of 1,088. However, the short traders should focus on retaking Jan 14 low at 1,071 in order to affirm their serious intentions.
Hourly chart