- Today 54% of all positions are bearish (53% yesterday)
- First formidable resistance lies at 1,224/30, while the nearest support level is 55-day SMA at 1,206
- Daily indicators are moderately bearish, but weekly studies recommend buying gold
- Economic events to watch over the next 24 hours: Euro zone Services PMI (Mar) and Retail Sales (Feb); US Trade Balance (Feb), Services PMI (Mar), JOLTS Job Openings (Feb) and ISM Non-Manufacturing PMI (Mar); UK Services PMI (Mar); New Zealand Dairy Price Index (Apr 5); Chinese Caixin Services PMI (Mar)
Gold advanced 1% on Tuesday after a two-day fall as Asian shares declined amid weak oil prices and mixed views on the outlook for the Fed's monetary policy. New orders for US factory goods declined in February and business spending on capital goods was much weaker than initially estimated, the latest sign that economic growth remained weak in the first quarter. This followed a strong US jobs data last week that showed non-farm payrolls surging by a better-than-expected 215,000, fuelling speculation that the US central bank could hike rates soon. Assets of SPDR Gold Trust, the top gold-backed exchange-traded fund, dropped 0.29% to 815.72 tonnes on Monday. The fund last week experienced its first net weekly outflow this year, after surging to the highest level in over two years in March.
After a small rebound in January, new orders for US factory goods declined in February and business spending on capital goods was much weaker than initially estimated, the latest sign that economic growth remained weak in the first quarter. According to the Commerce Department, new orders for manufactured goods fell 1.7% as demand decreased broadly, reversing January's downwardly revised 1.2% gain. There was weakness in a number of categories, led by a sharp drop in the volatile category of commercial aircraft. Demand for durable goods, everything from airplanes to computers and household appliances, dropped 3% in February, slightly worse than the 2.8% estimate. Orders in a category that serves as a proxy for business investment were down 2.5% following a 3.3% increase in January. The report underscores how US manufacturers are struggling with moribund global demand and a strong US Dollar, which makes American goods less competitive on overseas markets. On top of that, the sharp plunge in oil prices has resulted in dramatic cutbacks in investment spending in the energy industry. The Institute for Supply Management reported last week that its closely watched manufacturing index climbed to 51.8 in March, up from 49.5 in February.
The housebuilding activity in Britain remained steady in March, against economists' expectations for a slight drop. The Markit/CIPS construction PMI stood at 54.2 last month, unchanged from February's 10-month low. The gauge marked the 35th month in a row of growth, but indicated the slowest rate of output growth since June 2013. Although there was a recovery in commercial and civil engineering work in March, Markit reported that the rebound was offset by the residential housing sector, which recorded the weakest pace of growth since January 2013 despite efforts by the government to spur more housebuilding. Construction companies were more cautious over hiring last month, with the rate of employment growth falling to the slowest rate since June 2013. Moreover, 51% of survey respondents said they anticipate an increase in business activity at their units over the next 12 months, while only 11% forecast a slowdown. However, while this signalled that UK construction companies remain sanguine about their prospects for growth, the overall degree of confidence was the joint-lowest since December 2014. UK GDP growth for the fourth quarter was revised up to 0.6% from a previous estimate of 0.5%. However, more recent data has pointed to a decline in the pace of expansion in the first three months of 2016.
Upcoming fundamentals: Busy US session ahead
US fundamental calendar kicks off with trade balance data for February at 12:30 GMT. While the gap between exports and imports has constantly been negative for a long period of time in the world's largest economy, economists suggest that the difference is only set to worsen during the reported month. In particular, their median estimate calls for a $46.3 billion deficit, up from $45.7 billion in January. Next, at 14:00 the markets are looking for service sector activity figures. Data, which is released by the Institute for Supply Management, is considered to be one of the most crucial leading economic indicators. The PMI should have risen to 54 points in March from 53.4 points in February, meaning the consumer-driven industry is doing pretty well despite global instability. Along with the PMI, the JOLTS job openings are out at the same time. They will indicate the number of opened job positions in February 2016, excluding farming sector of the economy.
Gold volatile before tomorrow's FOMC minutes
Yellow metal hovered predominantly in the red territory on Monday, but the bears were only capable of pushing the price down to the 1,215 mark and not any below it. Even though we are seeing bullish pressure on early Tuesday, the rally is expected to be contained by a dense resistance cluster between 1,224 and 1,230. Up there, we have got the weekly pivot point, the 23.6% Fibonacci retracement of Dec-Mar uptrend and the 20-day SMA. The base scenario suspects a correction lower from here, but in case the bulls overcome this supply, the next immediate target will become the 1,241 mark represented by the monthly pivot point and the weekly R1.Daily chart
Gold is constantly staying above the Feb 26 low, as two attempts to cross this 1,211 mark have failed last week. A drop and consolidation below here would put at risk the 1,200 area where many support levels are found on both daily and hourly time frames. In the meantime, improvement to the outlook will be possible, if XAU/USD closes beyond 1,223 (200-hour SMA/downtrend) for two days in a row.
Hourly chart
54% of traders see gold lower
Bullish clients with OANDA took more action to increase their market portion on Monday, because on Tuesday it has already overtaken the 60% mark. As for SAXO Bank, here the positive gap between the bulls and bears widened to ten percentage points during the past 24 hours.