- Almost 60% of SWFX market participants are sceptical with respect to gold
- February uptrend line at 1,237 is holding ground, as positive sentiment is preserved
- Both daily and weekly technical indicators are backing the positive outlook
- Economic events to watch over the next 24 hours: German CPI (Feb); Italian Industrial Production (Jan); UK Trade Balance (Jan); Canadian Employment Change/Unemployment Rate (Feb)
Gold surged to the highest level in a year after the European Central Bank said that it would not slash interest rates further, supporting the Euro and making Dollar-denominated bullion less expensive for investors. ECB President Mario Draghi unveiled bold easing measures, slashing interest rates and expanding asset purchases, in a bid to revive the Euro zone's struggling economy. The Euro surged 1.6% following the central bank's decision and was set for the best week since the period ended February 5.
The number of Americans applying for unemployment benefits dropped more than expected last week, reaching the lowest level since October, signalling sustained improvement in the labour market. Jobless claims are being scrutinized for signs of labour market weakness following a recent massive stock market sell-off that resulted in a tightening in financial market conditions amid faltering global growth and concerns the world's number one economy was heading into recession. Initial claims for unemployment benefits dropped 18,000 to a seasonally adjusted 259,000 for the week ended March 5, the lowest level since mid-October, according to the Labor Department. Claims have now been below the 300,000 threshold, which is associated with healthy labour market conditions, for a year, the longest such stretch since the early 1970s. The four-week moving average of claims, considered a better measure of labour market developments as it strips out week-to-week volatility, declined 2,500 to 267,500 last week, the lowest level since late October. So far, the labour market remains on strong footing, with nonfarm payrolls surging by 242,000 jobs in February and the unemployment rate holding at an eight-year low of 4.9%.
Manufacturing conditions in Japan deteriorated in the first quarter of the year, indicating the world's third largest economy may have slipped back into recession this quarter. A predicted drop in sales and profits was the main driver behind Japan's factory sector contraction this quarter, increasing possibility that policy makers would loosen policy in the coming months. The Business Survey Index of large-scale manufacturers plummeted from 3.8 in the December quarter to -7.9 this quarter, the lowest level since the June 2014 quarter and much weaker than the expected index reading of 4.2. An index level above zero signals an expansion in factory activity, while a reading below zero indicates a contraction. Most manufacturers saw a sharp deterioration in domestic economic conditions this quarter, the Ministry of Finance reported. Nevertheless, employment levels managed to climb. Factories anticipate to see a 13.6% fall in profits for the second half of the current financial year, and a 1.8% decline in sales over the same period. However, capital investment is predicted to pick up 9.3% over the same horizon. The Japanese economy contracted 0.3% last quarter after consumer spending dropped. Fundamentals so far for the March quarter suggest the economy might have slid back into recession.
Upcoming fundamentals: Canada to see rising employment in February
Employment change expectations are suggesting the Canadian economy generated 10,000 new jobs in February after losing 5,700 workplaces in the first month of 2016. The rate of unemployment has most probably been steady at 7.2% and the participation rate decreased slightly to 65.8%. The numbers are due today at 13:30 GMT. Meanwhile, British trade balance might have retreated in January. Difference between exports and imports was 9.9 billion pounds in December in favour of the latter, while in January economists estimate the gap at 10.3 billion pounds. Trade data will be published by the Office for National Statistics at 9:30 GMT.
Gold reaches new multi-month peaks
A broad buoyant sentiment pushed the precious metal to fresh 13-month highs by Friday morning. Yesterday the bullion's selloff was successfully limited by the February uptrend below 1,240, and later moderately hawkish remarks by the ECB President Draghi resulted in a surge above 1,270. For now we see the weekly R1 as the first reliable resistance for the remaining 24 hours of this week's trading, with monthly R1 at 1,295 acting as the second supply level. As daily and weekly technical indicators are mostly bullish, we assume that gradual price increases will stay in place.Daily chart
In the one-hour chart the yellow metal has completed a very successful trade, by bouncing off the lower trend-line of the channel up pattern it has been hovering in since mid-February. Yesterday's development implies a climb in the direction of the round 1,300 level where the price is going to meet another positively-sloping trend-line. Moreover, the 2015 high at 1,307 is not out of reach any more, but first the bullion must deal with the aforementioned intermediate resistances.
Hourly chart
SWFX sentiment is bearish in almost 60% of all cases
Meanwhile, OANDA market expectations improved yesterday and now the bullish stance is being maintained by almost 58% of their clients. On the contrary, SAXO Bank's bulls have lost some ground on Thursday and their market portion plunged to 52% by the March 11 morning.