- A rally in prices caused the bullish market share to decline to 32%
- May high of the previous year is acting as a confident resistance; attention turns back to the South
- Technical indicators think the precious metal has a good chance of both growing and declining next week
- Economic events to watch over the next 24 hours: Swedish Unemployment Rate (Jan); EU Summit; ECB President Draghi Speaks; ECB Vice-President Constancio Speaks; US CPI (Jan); FOMC Member Mester Speaks; UK Retail Sales (Jan); Canadian Retail Sales (Dec) and CPI (Jan)
Gold steadied after sharp overnight gains on Friday, but traded above $1,200 an ounce as decline in equities sparked fresh safe-haven demand for the precious metal. Asian shares slid from the highest level in three weeks on Friday after US equities snapped a three-day rally. Bullion is also being supported by rising speculation that the Fed would refrain from hiking interest rates due to worries about the economy. Meanwhile, assets in SPDR Gold Trust, the world's top gold ETF, climbed 0.38% to 713.63 tonnes on Thursday.
The number of Americans applying for unemployment benefits unexpectedly declined last week, reinforcing the view the labour market continued to strengthen. Initial claims for state unemployment benefits decreased 7,000 to a seasonally adjusted 262,000 for the week ended Feb. 13, the lowest level since November, according to the Labor Department. The previous week's claims were unrevised. The four-week moving average of claims, which irons out week-to-week volatility, dropped by 8,000 to 273,250 last week. Claims have now been below the 300,000 threshold, which is associated with a healthy labour market, for 50 consecutive weeks - the longest stretch since the early 1970s. The gauge declined 12,000 between the January and February survey periods, suggesting a pick-up in job growth. At the same time, nonfarm payrolls rose by 151,000 in January. The health of the jobs market could determine whether the Fed hikes rates this year. How quick these lifts will come, though, will depend on how fast inflation pressures are able to bounce back after being kept at bay by cheap oil and lower costs of imports. Bets for a March rate hike have largely been eliminated due to tightening financial market conditions and concerns about the domestic and global economies.
China's consumer prices rose at the strongest rate in five months in January after vegetable prices increased in the run-up to the Chinese New Year. China's consumer price index climbed 1.8% in January from a year earlier, compared with a 1.6% annual rise in December, according to the National Bureau of Statistics. Increase in food prices were the main contributor to the inflation acceleration, as they surged 4.1%. Thus, the rise of inflation did not reflect a visible improvement in economic activity or broader consumer demand. Meanwhile, the non-food consumer inflation climbed 1.2% on an annual basis in January. At the same time, producer price index dropped 5.3% in January from a year earlier, declining for the 47th consecutive month and following a 5.9% slide in the prior month. Meanwhile, China's policy makers reassured nervous investors that Beijing will cushion the slowing economy, keep its currency steady and ensure employment remains stable. A rout in Chinese stocks last summer and the unexpected devaluation of the Yuan in August have shocked global markets, fuelling concerns about the health of the world's second-biggest economy and Beijing's ability to steer it simultaneously through both a prolonged downturn and radical restructuring.
Upcoming fundamentals: UK retail sales to recover amid lower prices and higher wages
December retail sales in the UK were disappointing, as they underlined weak holiday season. However, analysts foresee a major rebound in the first month of 2016. Retail sales have probably gained 0.7% on both core (excluding car fuel) and headline basis. The result will follow a dip of about 1% in December. In the meantime, Canadian retail and inflation data will be available at 13:30 GMT. Driven by seasonal factors, monthly December retail sales in this country are anticipated to decline by 0.7-0.9% after a climb of 1.1-1.7% in November. As for inflation, the year-on-year consumer price index is estimated to pick up to 1.7% in January from 1.6% in the previous month. Apart from fundamentals, there will be a closely-watched speech by the Cleveland Fed President Loretta Mester at 13:00 GMT. She will talk about the US economic outlook in Florida.
Gold erases three-day losses
The bullion saw a renewal of the confident uptrend on Thursday. Following success at the monthly R3 at 1,209 gold decided to move higher and eroded the weekly pivot point at 1,221. The only resistance to contain the rally was the May high at 1,232. The RSI indicator is on the verge of signaling that gold is becoming overbought again. We may observe a correction lower throughout Friday, with the key bearish target placed at 1,191 (Oct 2015 high). In the meantime, any surge above May high will immediately expose the recent multi-period high of 1,263.50.Daily chart
Gold benefited from the strong 200-hour SMA, currently at 1,211. Ability to violate the May 2015 high is the key to XAU/USD's future. It should be underpinned by the moving average line, which continues to develop with a moderate positive slope.
Hourly chart
Bullish market share drops lower to 32%
In the meantime, SAXO Bank distribution between the long and short traders moved in the opposite direction to the SWFX market, as long traders gained more ground to push their portion up to 58% by Friday morning. However, OANDA's long clients are now accounting for 58.5% of the entire market, down from 62.5% yesterday.