- SWFX traders are moderately bullish with respect to gold (55%)
- Key support for gold lies around 1,085; main near-term resistance to watch is placed at 1,104/07
- Daily technical indicators (including RSI) see the yellow metal unchanged in the next 24 hours
- Economic events to watch in the next 24 hours: ECB President Draghi Speaks; German IFO Business Climate (Jan); Italian Industrial Sales (Nov), Industrial Orders (Dec), Non-EU Trade Balance (Dec) and Retail Sales (Nov); Bundesbank Monthly Report; US Dallas Fed Manufacturing Business Index (Jan); UK CBI Industrial Trends Survey for Orders (Jan)
Business activity in the US manufacturing surged unexpectedly in January, rebounding from a more than three-year low. The flash manufacturing PMI reading from Markit climbed to 52.7, up from 51.2 in December, against economists' expectations for a reading to remain flat. As export orders showed signs of reviving, producers appeared to shrug off concerns about China. Given the recent volatility in financial markets, the sector's resilience is an encouraging signal for growth and employment in the wider economy. A separate report showed US existing home sales rebounded in December from a 19-month low, while prices increased, adding to signs the US housing market continued to recover despite signs of a moderation in economic activity in recent months. According to the National Association of Realtors, home resales soared a record 14.7% to an annual rate of 5.46 million units. For all of 2015, sales reached 5.26 million, the highest annual level since 2006. The national median home prices surged to $224,100, up 7.6% from a year earlier. At the same time, inventories of existing homes for sales plunged 12% to 1.79 million in December. The recovery in the housing sector helped boost the economy. New-home construction last year hit the highest level since 2007, while residential investment has added to GDP for six straight quarters.
Retail sales in Canada, the 11th largest economy in the world based on nominal GDP, surged at the highest pace since June 2014 in November. Gains were mostly driven by hot pre-holiday season, as retailers managed to use this time to boost revenue. Sales skyrocketed by 1.7% during the reported month, while economists had anticipated a rise of just 0.2%. Physical volumes surged by 1.5%, signalling that exactly more goods were sold by Canadian retailers and supermarkets. It seems that the Canadian economy will benefit from such a positive retail sales report in November, as domestic consumption accounts for 56% of the whole national output. GDP data will be available at the end of next week. As for inflation, consumer prices accelerated on an annual basis in December, even though there was a setback in terms of month-to-month change. Yearly CPI gained 1.6% over the past year, booking a gain from 1.4% in the preceding month. In the meantime, a less volatile consumer price growth reading released by the Bank of Canada slid to 1.9% in December, down from November's reading and also the BoC's target of 2%. The core CPI excludes such items as energy and seven other groups of products and services. Thus, it seems that inflation is not the major issue for the Bank of Canada, which is much more worried about slowing economy in the wake of tumbling oil prices.
Upcoming fundamentals: Only European data to provide gold with some volatility today
US session will be silent on the first working day of this week, being that we are approaching a very important Fed meeting later in the week and all focus is already on the monetary policymakers. Among just a few fundamentals today, Dallas Fed Manufacturing Survey will come out at 15:30 GMT, followed by US Treasury's 3M and 6M bill auctions at 16:30 GMT. As for Europe, market participants are awaiting some retail and trade numbers from Italy, the third largest economy of the Euro area. German Bundesbank is also going to release its monthly report on Monday, while German IFO business survey is due at 9:00 GMT in the morning.
Gold refrains from confirming triangle pattern
Our short-term views with respect to the bullion are broadly unchanged. Since Thursday the metal has been oscillating around 1,100. We are therefore remaining bearish on a daily basis, as downward pressure should be created by 100-day SMA and monthly R2 at 1,104/07. By violating this resistance gold is going to confirm the triangle pattern, the event which will change our outlook significantly to the upside. Main support is, however, offered by 20-day SMA/monthly R1/weekly S1 at 1,088/83. Inside such a dense technical cluster around the spot a continuation of the sideways trend is more likely.Daily chart
Market participants seem to be waiting for more pronounced signals and triggers to move gold prices in either direction. In the 1H chart the metal holds below Oct 2015 low and January downtrend at 1,104/09. At the same time, the range remains very tight, as the price is supported by sustainable demand at 1,091/88 (200-hour SMA and Dec 2015 high).
Hourly chart