- Only six percentage points continue dividing the bulls (53%) from bears (47%)
- Consolidation above 200-day SMA became a fact, as sentiment is expected to grow further
- Technical indicators foresee a downward correction next week
- Economic events to watch over the next 24 hours: German Factory Orders (Dec); ECB's Nouy Speaks; US Non-Farm Employment Change (Jan), Unemployment Change (Jan) and Average Hourly Earnings (Jan); US Baker Hughes US Oil Rig Count (Feb 5); Canadian Employment Change/Unemployment Rate (Jan), Trade Balance (Dec) and Ivey PMI (Jan)
Gold traded near the highest level since October on Friday, heading for its biggest weekly gain in a month as the US Dollar weakened due to growing doubts the Fed can stick to its interest rate hike plan. Bullion has gained more than 3% so far this week, on track for its biggest such advance since early January. An unstable global economy has also spurred buying interest in the precious metal. Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, continued to increase, reaching 22.3 million ounces on Thursday, the most since late October.
The number of Americans applying for unemployment benefits increased more than expected last week, signalling some loss of momentum in the labour market due to a steep economic slowdown and stock market rout. Initial claims for state unemployment benefits surged 8,000 to a seasonally adjusted 285,000 for the week ended January 30, the Labor Department reported. The prior week's claims were revised to show 1,000 fewer applications received than previously reported. Despite the increase last week, claims remained below 300,000, a level associated with strong labour market conditions, for the 48th straight week. That is the longest run since the early 1970s. The four-week moving average of claims, considered a better measure of labour market trends as it strips out week-to-week volatility, rose 2,000 to 284,750 last week. The data came ahead of the government's more comprehensive report on Friday. Economists predict that the report will show employers added 200,000 jobs and the jobless rate remained at 5.0%. Meanwhile, productivity of US employees declined at the sharpest pace in almost two years toward the end of last year. Output per hour fell at an annualized rate of 3% in the fourth quarter, compared to a 2% plunge expected by the markets, and following a 2.1% increase in the third trimester.
The Reserve Bank of Australia voiced a cautious optimism on the domestic economy in its quarterly update on monetary policy in light of global financial turmoil. However, the central bank reiterated that despite local optimism, uncertainty about China's growth prospects and the management of its economic slowdown remain a major global headwind. The RBA was confident that robust demand for jobs would persist despite slowdown in the mining sector and rising global market volatility. Furthermore, the bank admitted that the transition out of the mining boom was starting to take hold. The RBA made no significant changes to its prediction for GDP growth from its November statement, expecting the domestic economy to grow at an average pace of 2.5% in 2016 and 3% in 2017. However, the central bank predicted a persistent decline in the unemployment rate, whereas back in November the RBA said it expected the jobless rate to hold between 6.0%-6.25% over the next 12 months. Meanwhile, the official rate for December dropped to 5.8% after peaking at 6.3% during 2015. In addition, the RBA repeated the easing bias included in the recent interest rate decision when the cash rate was left unchanged at all-time low of 2%. Australia's inflation was seen to remain persistently low, providing the central bank with a greater scope for easier policy.
Upcoming fundamentals: US/Canadian employment to set market sentiment today
Two countries of the G8 group are going to publish an important piece of data on Friday. American companies have been hiring about 200,000 new employees every month, while Canadian companies have somewhat suffered from declining oil prices which led to an increase in jobless rate to 7.1%. Nonetheless, the world's most powerful economy is expected to generate 190,000 more jobs in January in spite of any market turbulence in the beginning of the year. Data is closely watched by economists, because it is largely determining the future pace of interest rate hikes by the Federal Reserve. Canadian economy has probably added 6,000 new jobs last month.
Gold to appreciate for sixth consecutive day
Yellow metal remains increasingly buoyant for the moment, given global economic uncertainty and expectations that the Fed will keep interest rates low. Yesterday gold eroded the monthly R1/weekly R2/downtrend at 1,143/47 and was only limited by the Sep 2015 high at 1,156. However, possibly poor US jobs data might be another bullish signal for bullion traders and the key focus will then shift to even higher levels in the area of 1,162/64 (weekly R3; May-Oct 2015 downtrend), followed by the second monthly resistance and Aug 2015 high at 1,168/70.Daily chart
In the hourly chart, a bullish trend-line connecting maximums of Jan 15, Jan 20 and Jan 27 was ultimately penetrated by the bulls yesterday. This event comes as an extra positive signal for the metal, which is now going to aim at Aug 2015 high near 1,170. The 200-hour SMA has a massive 30-dollars gap with the spot, but it is quickly moving to the North in order to support gold.
Hourly chart