- Only marginally more than three out of ten SWFX traders are betting on gold's advance
- Rising US Dollar is exposing multi-month uptrend at 1,245; a breach would confirm the wedge pattern
- Both daily and weekly aggregate indicators are positive on March 21
- Economic events to watch over the next 24 hours: Euro zone Current Account (Jan); FOMC Members Lacker and Lockhart Speak; US Existing Homes Sales (Feb); MPC Member Forbes Speaks; RBA Governor Stevens Speaks
Gold fell on Monday, but a weaker US Dollar provided support to the precious metal. The Dollar extended its losses for a third consecutive week in the wake of dovish hints from the Fed. Central banks' rhetoric turns more dovish across the globe, but banks leave themselves with fewer policy tools, meaning there is a less scope for fresh upside for bullion based on further easing measures.
US consumer confidence unexpectedly worsened in March for the third consecutive month due to concerns of increasing petrol prices and mounting expenses, while the complex labour market situation is undermining any rise in salaries and wages, even though increasing number of people are being employed. The Thomson Reuters/University of Michigan preliminary Consumer Confidence Index dropped to 90.0 points in March, compared with the final 91.7 seen in the prior month, when it had declined to a fresh three-month low. The consumer confidence index reached its all-time high in January 2000, at 112, decreasing thereafter. The gauge has never climbed above 100 again since 2004. Meanwhile, St. Louis Fed President James Bullard said that the Fed's inflation and employment goals have essentially been met and it would be "prudent" to hike interest rates. Bullard was among the majority of Fed officials who voted to keep rates on hold at the central bank's two-day meeting last week, and he has expressed concern recently about a decline in inflation expectations. However, those expectations have been moving higher lately, and Bullard said that he now feels "inflation net of the oil price shock is reasonably close to target." Yet, he did not indicate when the next interest rate hike should occur.
Canada's annual inflation cooled in February after hitting a fresh high in the prior month, as sharp drops in energy and gasoline prices offset increases in fruits and vegetables. The cost of living in Canada climbed at an annualized rate of 1.4% last month, down from 2.0% in January, Statistics Canada reported. Gasoline prices plummeted a whopping 13.1% year-over-year and 6.9% from January. If gasoline prices are excluded from the calculation, the inflation rate would be 1.9%. Nevertheless, food prices were one of the biggest drivers keeping the inflation rate up. Consumers paid 3.9% more for food last month compared with February 2015. Economists had predicted Canada's overall inflation rate to come at 1.5% and core inflation to be 2.0% last month. A separate report showed unexpectedly strong retail sales in January, driven by motor vehicle and parts dealers. Retail sales surged 2.1% to $44.2 billion in the reported month, compared with $43.2 billion in December. The motor vehicle and parts dealers made up about one-quarter of January's retail sales, soaring 4.8% from December to $11.6 billion the following month. Meanwhile, core retail trade, which excludes automobile and parts sales, increased 1.2%, also beating the forecast of 0.4%.
Upcoming fundamentals: US home sales to tumble due to seasonal factors
Momentum in the US housing market has probably declined over the second month of 2016. Seasonal factors, such as winter, are normally resulting in decreased construction activity and ultimate sales. The data for existing home sales is out at 14:00 GMT on Monday, while economists forecast a month-on-month drop of 2.7% in February and the total annualized amount of 5.32 million. This is going to be down from 5.47 million seen in January, but much higher than 4.88 million sales in February 2015. In the meantime, the Richmond Fed President Jeffrey Lacker (no FOMC vote in 2016) is going to participate in the Bank of France event in Paris at 8:15 GMT on Monday. The Atlanta Fed President Dennis Lockhart will speak about US economy later at 16:40 GMT in the state of Georgia. He is a non-voting FOMC member this year.
Gold erodes weekly gains on buoyant Dollar
The bullion continues to pare the rally, which took place throughout the previous week amid dovish policy decisions of the Fed. Now the Greenback is back on track, meaning gold is now attracting the bears that are likely to attempt penetrating the long-term uptrend at 1,245. A drop under here would confirm the rising wedge pattern and it will considerably worsen our future outlook for the metal. The following support is the 20-day SMA at 1,240; however, it is not backed by any other demand level for now. Most probably, the target will quickly switch to a dense cluster of supports just above 1,200.Daily chart
Similar to the daily chart, in case of the hourly chart we claim that there still exists a chance of a rebound from the 1,240 mark. Nevertheless, downward pressure will be created by the 200-hour SMA (1,251), which is slowly heading to the South. Gold is required to make a confident comeback beyond 1,258 in order to improve the outlook for the 1H chart.
Hourly chart
SWFX sentiment faces recovery issues
In the meantime, a rebound was much more successful for SAXO Bank sentiment. Over the weekend the bulls regained a majority of over four percent against their bearish counterparts. The distribution between positions in the OANDA market is largely flat at 54.76%-45.24% in favour of long traders.