- Bullish SWFX market share increased to 44% from 42%, despite no trading on Friday
- Prices are equally exposed to both bullish and bearish risks on Monday, as nearest resistances and supports are placed quite far away from the spot
- Weekly technical indicators are overwhelmingly positive on gold and expect an overall recovery this week
- Economic events to watch over the next 24 hours: US Personal Income (Feb), Personal Spending (Feb), International Trade in Goods Balance (Feb) and Pending Home Sales (Feb)
Japan's consumer inflation remained flat in the year to February as low energy costs and weak consumption restrained price growth, keeping the Bank of Japan under pressure to introduce additional stimulus even after easing policy less than two months ago. A separate BoJ index, which strips out the effects of energy and fresh food prices, showed consumer inflation at 1.1% in the year to February, unchanged from January. Core consumer prices in Tokyo, a leading indicator of nationwide prices, recorded the biggest annual decline in nearly three years in March, suggesting that inflation will remain tepid amid weak demand as the world's third-largest economy stands on the edge of recession. The core CPI for the Tokyo metropolitan area slid 0.3% in March, after declining 0.1% in February. The data reinforces a dominant market opinion that the central bank will be forced to cut its inflation forecasts and push back the timing for reaching its 2% price target at a quarterly review of its projections next month. When the BoJ launched its massive asset-buying programme in April 2013, it pledged to achieve 2% in roughly two years. With inflation remaining benign three years into the commitment, the central bank has repeatedly postponed the timeframe for hitting its inflation goal, including at its January meeting.
Sales of newly built single-family homes recovered modestly in February as a rise in the West offset steep declines in other regions, suggesting the housing sector has been recovering gradually amid a limited property supply on the market. The Commerce Department reported home sales increased 2.0% to a seasonally adjusted annual rate of 512,000 units. Moreover, January's figure was revised up to 502,000 units from the previously reported 494,000 units. New single-family home sales were supported by a sturdy 38,5% advance in the West last month, which reversed January's 32.7% plunge. However, excluding the West, home sales declined 8.1%. New home sales account for about 9.2% of the housing market. The median price of a new home stood at $301,400 last month, up 2.6% from a year earlier. Other signs indicate slow gains in the housing market. Sales of existing homes, roughly 90% of all home purchases, plunged 7.1% in February from January, the National Association of Realtors reported this week, but they rose 2.2% from the prior year. With the improving labour market boosting household formation and mortgage rates still low by historical standards, housing fundamentals remain strong. The sector is expected to continue to contribute to economic growth this year.
Gold in limbo after commodity markets reopen
The bullion is continuously set to hover in limbo after the commodity market returned back to trading on Monday morning, meaning the outlook is largely the same as we had indicated on Friday. This is because the closest resistance lies at 1,227 (23.6% retracement of Dec-Mar uptrend) and the nearest support is the 1,205 mark (monthly PP), while the present spot is placed somewhere in between at 1,215.50. This week's technical indicators are giving a "strong buy" signal, meaning we can foresee buoyant gold near the aforementioned support and also the weekly S1/lower Bollinger band at 1,199.Daily chart
Notwithstanding a moderate drop in prices yesterday, the spot managed to contain this decline by the Feb 26 low at 1,211.43. Additional demand is offered by the Feb 22 low at 1,201.71. Unless they are penetrated, our short-term neutral outlook will not be abandoned. Adding to that, it should be pointed out that the 200-hour SMA (1,238.62) will begin putting more aggressive pressure on gold soon.
Hourly chart