- SWFX traders are moderately bullish with respect to gold, namely in 55% of all cases
- Oil price developments are forecasted to continue putting pressure on other commodities incl. gold
- Aggregate daily indicators are still positive for the next 24 hours, but Stochastic is now on the "sell" side
- Economic events to watch in the next 24 hours: World Economic Forum in Davos (Day 2); ECB Interest Rate Decision, Monetary Policy Statement and Press Conference; Euro zone Consumer Confidence (Jan); US Unemployment Claims (Jan 15) and Philadelphia Fed Manufacturing Index (Jan); US Crude Oil Inventories (Jan 15); Japanese Nikkei Manufacturing PMI (Jan)
A bunch of worse than expected data was released in the US. Consumer prices unexpectedly declined in December amid drops in food and energy prices. The Labor Department reported the consumer price index declined 0.1%, after being flat in November. Despite the fall last month, costs of living rose 0.7% in the 12 months through December, the biggest gain in a year, following the 0.5% increase in November. The annual inflation rate is climbing as the oil price-caused weak readings in 2015 drop out of calculation. The core CPI, which excludes food and energy costs, rose 0.1%, after climbing 0.2% for three consecutive months. Measured on an annual basis, the core inflation increased 2.1%, the biggest gain since July 2012, compared with a 2.0% rise in November. A separate report showed US housing starts and permits dropped in December following hefty gains in the preceding month. Groundbreaking declined 2.5% to a seasonally adjusted pace of 1.15 million units. November's data was revised to show 1.8 million unit rate. Nevertheless, December was the ninth month in a row that starts were above 1 million units, the longest run since 2007. At the same time, building permits slipped 3.9% to 1.232 million in December. Housing construction remains subdued by historical standards, although the number of housing units started in 2015 as a whole was 10.8% higher compared to 2014.
The Bank of Canada kept its key interest rate on hold at 0.5%. The central bank said that risks to inflation remained roughly balanced, despite a renewed decline in oil prices and sluggish economic growth. The BoC expects inflation to climb to 2% by early 2017, while core inflation would remain around 2%. Meanwhile, declines in oil prices and other commodities represented a setback for the Canadian economy. The economic growth likely stalled in the final quarter of 2015, pulled down by temporary softness in the US economy, moribund business investment and several other temporary factors. The BoC now expects the economy's return to above-potential growth to be delayed until the second quarter of 2016. The central bank projects that the nation's economy will grow by about 1.5% in 2016 and 2.5% in 2017. Canada's manufacturing sales rose more than expected in November, halting a three-month falling streak. According to Statistics Canada, manufacturing sales increased 1.0%, compared with economists' expectations for a 0.5% gain. November's growth in manufacturing sales was boosted by a 3.8% advance in motor vehicle sales, which benefited from a decision by automakers to focus on higher value models. Sales were 18.0% higher than in November 2014. The motor vehicle industry's share of the total manufacturing sector in November was 10.9%, the highest since the 11.3%seen in March 2007.
Upcoming fundamentals: ECB event to dominate, but US data still in focus
For the commodity market American fundamentals will have a higher importance level throughout Thursday than the ECB meeting. US oil stockpiles report for the week ended Jan 15 is set to be published at 16:00 GMT, and it is going to be preceded by some 13:30 GMT statistics on initial jobless claims and manufacturing survey from the Fed's Philadelphia region. Both of them are estimated to improve marginally, but any unexpected surprises are putting the Dollar at risk of declining over the next 24 hours. Alongside, oil reserves have most probably continued to build up last week, as economists see a rise in inventories of 3.3 million barrels.
Gold is pressured by the 1,110 supply zone
A one-day outlook for gold has a slight bearish bias, even though overall trading is likely to be range bound between 1,104 and 1,086. The bulls are expected to experience some difficulties near 1,110 where we see a formidable resistance being formed by Jan 8-20 downtrend line, monthly R2 and 100-day SMA. A success here will expose the 1,127/32 area (monthly R3; 200-day SMA), which itself may provoke a bounce back in the medium-term. In the meantime, the bears will continue focusing on 55-day SMA at 1,076, which guards Dec-Jan uptrend as the main target line.Daily chart
Inside a bullish channel, which extends back to early December, the bullion has an opportunity to grow up the 1,120/23 zone in the nearest future. However, the bulls should immediately meet a fresh January downtrend at 1,109. Inability to grow above the latter will proclaim that gold is now trading inside a symmetrical triangle, with key support offered by Dec-Jan uptrend line at 1,077.
Hourly chart