- Only 53% of SWFX traders are bearish, down from 59% on Friday
- First formidable resistance lies at 1,224/30, while the closest support overtakes large area at 1,205/1,188
- Daily indicators are moderately bearish, but weekly studies recommend buying gold
- Economic events to watch over the next 24 hours: Euro zone Unemployment Rate (Feb) and PPI (Feb); US Factory Orders (Feb) and Labour Market Conditions Index (Mar); FOMC Members Rosengren, Evans and Kashkari Speak; Australian Trade Balance (Feb); RBA Interest Rate Decision
Gold declined on Monday, after US jobs report spurred speculation that the Fed could hike interest rates sooner than expected. According to the US Department of Labor, non-farm payrolls surged 215,000 last month, following the upwardly revised reading of 245,000 in February. Nevertheless, the unemployment rate inched up slightly to 5%, driven up by a larger number of people looking for work. Assets in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, declined 0.15% to 818.09 tonnes on Friday, but remain near the highest in over two years.
China's manufacturing activity improved in March, easing concerns over health of the world's second biggest economy suggesting ongoing stimulus measures are starting to support growth. China's official manufacturing PMI rose to 50.2 for March, compared with economists' forecast of 49.3, returning to growth for the first time since July. That compares with 49.0 in February, which was the lowest level since 2011. The sub-index measuring new orders surged to 51.4 from 48.6 in February, while the production sub-index also increased to 52.3 from 50.2, the National Bureau of Statistics reported. A similar improvement was seen in the Caixin manufacturing PMI for March, which rose to 49.7 from 48.0 in February, marking the first increase from the previous month in a year. Meanwhile, China's official services PMI rose to 53.8 in March from 52.7 in February. China's transition from an export-driven economy to a consumption-based model has come at a huge cost to growth. In 2015 the world's second-largest economy grew at 6.9%, the slowest pace in 25 years. To counter slowing growth, China's policy makers have taken a slew of easing measures, including interest rate and reserve requirement ratio cuts from the central bank, the People's Bank of China.
Britain's manufacturing activity increased less than expected in March, underscoring the uneven nature of the economy as the global slowdown undermines exports. According to Markit Economics, manufacturing PMI climbed to 51 last month, up from 50.8 in February. That meant the average for the first quarter of the year equalled the lowest level since 2013, Markit reported. Manufacturers continued to rely on the domestic market for new business in the reported month as factories reported that weaker global economic growth dented new work from key trading partners including the US and Europe. An index of employment also declined for a third straight month, with investment-goods firms seeing the sharpest cuts. The UK's Office for Budget Responsibility lowered its annual GDP outlook for this year by four percentage points to 2%. Growth for 2017 was also revised down to 2.2% from 2.5%. The OBR also cut the outlook for inflation, expecting the annual rate of CPI at just 0.7% for 2016. Inflation is then seen climbing to 1.6% in 2017, compared to the 1.8% estimated before, and below the official target of 2%. The OBR's forecast is based on the assumption that the UK remains a member of the EU after the June 23 referendum, meaning that a Brexit could depress growth projections even further.
Upcoming fundamentals: FOMC speeches, RBA rate verdict
Three members of FOMC are going to talk on Monday, but only one of them will be directly speaking on economy and monetary policy. Chicago Fed President Charles Evans, who is not voting for Fed decisions this year, will speak in Hong Kong at 7:00 GMT Tuesday morning. In the meantime, Boston and Minneapolis Fed presidents Eric Rosengren and Neel Kashkari will talk at 13:30 GMT on Monday and 2:00 GMT on Tuesday, respectively. Among other central banks, the Reserve Bank of Australia will hold its monetary policy meeting tomorrow morning and all decisions will be known by 6:30 GMT. All economists who participated in the Bloomberg survey are expecting no change to the stance of monetary policy, meaning the RBA will likely hold the cash rate at 2.00% this time.
Gold to look at 1,205/1,188 dense support
Technical trading of the bullion remains uncertain at the moment, because there are several important resistances and supports surrounding the present spot price of 1,217. From the upside, the weekly pivot point at 1,224 is the most immediate supply, followed by the 23.6% Fibonacci retracement of the Dec-Mar uptrend and the 20-day SMA at 1,227/30. Still, we suspect that the market will attempt to push gold prices lower in the near-term. However, XAU/USD will inevitably hit a tough cluster of demand levels and the first support is going to be placed at 1,205 (weekly S1; 55-day SMA).Daily chart
Indecisive development around the mid-March downtrend last week forced the market to refocus back to the downside. Gold slipped under the 200-hour SMA, which is strengthening the trend-line. However, there is an important signal coming from the southern side. April 1 turned to be the second day last week when the metal failed to overcome the Feb 26 low at 1,211. One more failure here may urge us to revaluate bearish competency to drag the prices lower.
Hourly chart
SWFX bullish bets rebound with downtrend in prices
Meanwhile, still about 58% of all OANDA clients are preserving a positive view on gold prices. While also being bullish on the matter, SAXO Bank longs' advantage is smaller at 52.9% (53.7% on Friday) against 47.1% for short market participants.