- SWFX traders are moderately bullish with respect to gold, namely in 56% of all cases
- US inflation statistics to be a key fundamental driver for gold on Wednesday
- Daily technical indicators are still positive for the next 24 hours
- Economic events to watch in the next 24 hours: World Economic Forum in Davos (Day 1); German PPI (Dec); US CPI (Dec); Housing Starts (Dec), Building Permits (Dec) and Crude Oil Inventories (Jan 15); UK Claimant Count Change (Dec), Unemployment Rate (3M-Nov) and Average Hourly Earnings (Nov); Swiss ZEW Economic Expectations (Jan); Bank of Canada Interest Rate Decision and Monetary Policy Report; Canadian Wholesale Sales (Nov) and Manufacturing Sales (Nov)
China's industrial production and retail sales data disappointed in the last month of 2015. Output from the nation's mines, factories and utilities rose 5.9% in December from a year ago, slowing from the 6.2% growth in November, the National Bureau of Statistics reported. Analysts, however, had predicted industrial output to increase 6.1%. Worse-than expected output data signals persistent weakness in factory activity at the end of the year. For the full year of 2015, China's industrial production increased 6.1%, compared with an 8.3% surge in 2014. At the same time, retail sales soared 11.1% in December from a year earlier, slowing from 11.2% rise in the preceding month and also missing expectations for an 11.2% advance for December. 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.
The British inflation climbed to the highest level in eleven months, with transport costs, mainly air fares and petrol being the main contributor to the rise. According to the Office for National Statistics, the consumer price index increased 0.2% in December amid a hefty surge of 46% in air fares in the reported period. Moreover, core inflation, which strips out volatile components such as energy, food and alcohol, rose to 1.4%, reaching the highest rate in more than a year. However, the data showed CPI for the year as a whole in 2015 was zero, the lowest annual reading since records began in 1950, compared with 1.5% in 2014. Benign price pressures and slowing wage growth have forced the Bank of England to refrain from hiking interest rates any time soon, particularly as wage growth has been slowing and the weakness in the world's economy has been undermining British output. Investors' expectations stand for an interest rate rise to occur not earlier than the third quarter of this year. Furthermore, BoE Governor Mark Carney confirmed that the British economy is not yet strong enough to withstand interest rate hike. The ongoing decline in oil prices, volatility in China and a slowdown in wages growth in Britain have moved the BoE further into wait-and-see mode.
Upcoming fundamentals: Analysts are divided over BOC's rate decision
January 20 is full of important economic events throughout the whole trading day. Among them, the Bank of Canada is expected to decide on interest rates today by 15:00 GMT. Odds for a rate cut hover around 50% for the moment, meaning only half of economists surveyed are waiting for monetary policy change this time. The key interest rate stands at 0.50% right now, meaning there is still scope for easing, especially considering weak economic growth and inflation due to oil price collapse. In the UK labour market data is out at 9:30 GMT. Initial jobless claims are estimated to grow marginally by 2,800 in December, with unemployment rate being flat at 5.2%. However, wage growth in Britain has probably cooled down from 2.4% to 2.1% in the three months through November, which puts additional pressure on the Bank of England in terms of its policy normalisation.
Gold continues to fluctuate around weekly PP
One more trading session was spent without any bullish or bearish lead. The bullion hovered in a quite wide range, but ended the US session just below the weekly pivot point at 1,086. Next three days will be driven by important fundamentals from US and other regions. In particular, US CPI data should drive gold on Wednesday. A positive surprise is likely to trigger losses for the yellow metal down to monthly R1/20-day SMA at 1,084/83. In the meantime, bullish traders are feeling confident in targeting the last year's September low at 1,098, which guards a major psychological level of 1,100.Daily chart
In the one-hour chart, the state of affairs has been little changed since yesterday. XAU/USD is trying to gain sufficient bullish momentum to breach the 200-hour SMA, currently at 1,091. In case this line is violated, we will expect gold to move towards Oct 2015 low at 1,104. This scenario is getting broad support from daily technical indicators at the moment.
Hourly chart