- There has been a minimal increase for bullish SWFX market share from 41% to 42% over Thursday
- All eyes on US payrolls ahead of March Fed meeting; poor data risks sending gold above 1,280
- Weekly technical indicators continue expecting a positive case for gold
- Economic events to watch over the next 24 hours: US Non-Farm Payrolls, Average Hourly Earnings and Unemployment Rate (Feb); US Trade Balance (Jan); Canadian Trade Balance (Jan) and Ivey PMI (Feb)
Gold fell on Friday, but traded close to a 13-month high hit in the prior trading session, when a weaker Greenback and technical buying supported the upside momentum of the precious metal. Investors are awaiting crucial US non-farm payrolls report due later in the day. Economists are forecasting total non-farm employment to have grown 190,000 in February, while the unemployment rate is predicted to remain unchanged at 4.9%. A strong reading for February could limit further gains in bullion, now up 19% so far this year and among the top commodity performers.
The number of Americans seeking jobless benefits unexpectedly increased last week, but remained at a level that is consistent with gradual improvement in the labour market. Initial claims for unemployment benefits rose 6,000 to a seasonally adjusted 278,000 in the week ended February 27. Claims have climbed the past two weeks, but are still down from the end of January. The four-week moving average of claims, which smoothes weekly volatility, fell 1,750 to 270,250 last week. A report earlier in the week showed US private sector created more jobs than expected in February, another sign that the US job market remains resilient despite economic weakness overseas and volatility in financial markets. According to payroll processor ADP, US private companies hired 214,000 workers last month, whereas economists had expected a gain of 190,000 jobs. Investors now await US Labor Department's more comprehensive non-farm payrolls report on Friday, which includes both public and private-sector employment. Economists are forecasting total non-farm employment to have grown 190,000 in February, while the unemployment rate is predicted to remain unchanged at 4.9%. A separate report showed the US service sector grew more slowly in February, according to the Institute for Supply Management. The index of non-manufacturing activity dropped to 53.4 from 53.5 in January.
Business activity in the UK's dominant services sector, which accounts for 88% of the whole economy, cooled sharply in February amid concerns about global economic slowdown, market turbulence and the possibility of Brexit. The Markit/CIPS services PMI plunged to 52.4 in February, down from 55.6 in the prior month, marking the lowest level since March 2013. The headline measure came in against economists projections of 55.1. Growth of both total business activity and new business were the weakest since March 2013, forcing firms to increase employment at the slowest pace in more than two years. The data followed two similar surveys that track activity in the construction and manufacturing sectors, which also fell well short of expectations. The UK construction PMI for February plunged to a 10-month low, while the manufacturing PMI plummeted to a 34-month low, as economic uncertainty weighs on industrial sector. Britain's all-sector PMI declined to 52.9 in February, down from 56.1 in the prior month, hitting the lowest level since April 2013. The UK's gross domestic product now looks on track to grow by just 0.3% in the first quarter of 2016, Markit estimated, compared with the 0.5% rate in the final three months of 2015, marking the weakest performance since late 2012.
Upcoming fundamentals: Employment statistics to decide Fed's rate hikes path
Markets are solely preparing for a huge monthly employment report from the world's most powerful economy due at 13:30 GMT, which is assumed to be one of the most important indicators in the financial industry. The US disappointed in terms on job creation in January by adding only 151,000 new payrolls. At the same time, wages posted a noticeable 0.5% gain the beginning of the year and jobless rate slumped below 5%. For February market analysts foresee a 195,000 gain in employment and the rate of unemployment remaining flat at 4.9%. Alongside, wages could add additional 0.2% on a monthly basis. As the labour market continues to tighten, everyone including the Fed is looking for some wage pressure to be finally materializing. In the wake of recent market volatility the probability of the Federal Reserve raising interest rates in March is only about 10%, according to futures contracts on the Fed Funds rate. However, any decent report may change the state of affairs and drive rate expectations to the upside.
Gold at new annual highs on weaker Greenback
Yellow metal brought substantial returns on March 3 when the price surged to almost the 1,270 mark from 1,240 in one day. With markets becoming more volatile ahead of NFP data from the US, the Dollar pared gains and provided gold with upward momentum. The high of Feb 11 at 1,263 was penetrated and now the price is hovering at peaks last seen in February 2015. Today is a highly data-dependent day. Disappointing payrolls may push the bullion to weekly R2 (1,277) with a possibility of growing even closer to 1,300. Alongside, good data will help the bears to reclaim the weekly R1 at 1,249.Daily chart
In the one-hour chart we would allow for more bullish trading in the direction of 1,278 where the price of gold will meet a resistance, namely the trend-line connecting Feb 18/24 peaks. From here we estimate a leg down to 1,234 (200-hour SMA) and, possibly, another February uptrend at 1,228. However, technical indicators are opposing this idea and are sending an aggregate signal to buy the metal both on Friday and next week.
Hourly chart
Broadly no changes registered for market sentiment on gold
It seems to be a major historical moment for gold's sentiment in the SAXO Bank market. Here the bearish market share has formally gone into majority for the first time in many months. In reality, sentiment is considered to be perfectly neutral, as there is only a six percentage point difference at the moment. Alongside, long OANDA clients expanded their advantage to 53.55% by Friday morning compared to only 50.30% one day ago.