- Bullish-bearish gap is decreasing slowly, as still only 37% of positions are bullish
- 55-day SMA is expected to endorse bullish traders, as failure here will result is deterioration of outlook
- Daily technical signals are no longer bearish on gold
- Economic events to watch over the next 24 hours: Euro zone CPI (Mar); US CPI (Mar) and Unemployment Claims (Apr 9); FOMC Members Powell and Lockhart Speak; Bank of England Interest Rate Decision; Chinese GDP (Q1), Industrial Production (Mar) and Retail Sales (Mar); Japanese Industrial Production (Feb)
Gold declined 1% on Thursday, extending losses into a third trading session as the US Dollar climbed and Asian stocks rose amid expectations global central banks would ease monetary policies to cushion weakening economies. Asian equities soared to their highest levels in more than four months, while regional currencies fell against the Greenback. Assets of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, dropped 5.05 tonnes to 810.09 tonnes on Wednesday, its lowest in a month.
Bank of Japan Governor Haruhiko Kuroda said the central bank stood ready to expand monetary stimulus again if recent weaknesses in inflation expectations persist, stressing that there are "many ways" to do so to reach the price target. Kuroda also dismissed the view the BoJ's decision in January to introduce negative interest rates was directly aimed at weakening the Japanese Yen to give Japan's exports a competitive advantage. While maintaining his optimistic view of Japan's economic outlook, Kuroda admitted that inflation expectations have been weakening in recent months. The BoJ may reconsider its current projection that inflation will hit 2% around the first half of fiscal 2017 if assumptions it was based on, such as oil price moves, change. In the meantime, the top executive of Mitsubishi UFJ Financial Group Inc., Japan's biggest bank, brutally criticised the central bank, saying its negative interest-rate policy has resulted in anxiety among households and companies and prolonging it may weaken financial institutions. President Nobuyuki Hirano said there is "no guarantee" that negative rates will spur companies to increase capital spending as low borrowing costs and deflation have been "business as usual for over a decade." Lenders will not be able to pass on negative rates to individual and corporate depositors.
The Bank of Canada maintained its key interest rate at 0.5%, saying the Canadian economy continues to adjust to the oil price shock. The central bank admitted that GDP growth in the first quarter appeared to have been unexpectedly robust, but some of that strength was due to temporary factors and is likely to wane in the second quarter. Even though non-resource exports are predicted to strengthen, their profile is weaker than previously thought, partly due to slower foreign demand growth and the higher Canadian Dollar. The economy continues to create net new employment, especially in the services sector. Against this background, household spending continues to increase moderately. On the international outlook, the BoC expects growth in the global economy to strengthen gradually from around 3% in 2016 to 3.5% in the next two years, a weaker growth projection compared with January's forecast. After a weak start to 2016, the US economy, Canada's major trading partner, is expected to regain momentum, but with a lower profile and a composition that is less favourable for Canadian exports. In light of these external and domestic developments, the central bank now projects real GDP growth of 1.7% in 2016, 2.3% in 2017 and 2.0% in 2018, suggesting the output gap could close somewhat earlier than the BoC had estimated in January, likely in the second half of 2017.
Upcoming fundamentals: China's GDP increase projected at 6.7% in Q1
A long-lasting slowdown of Chinese economy is probably going to decrease the Q1 growth rate to 6.7% year-on-year. This is going to be lower than 6.8% registered back in the last three months of 2015. This data will be due at 2:00 GMT on Friday morning, as it will additionally cover retail sales and industrial production for March. Japan is also going to release its manufacturing output statistics at 4:30 GMT tomorrow morning, while owing to appreciating Yen the indicator is estimated to show negative growth for both monthly and annual time frames.
Gold is losing ground for three days
After a relatively calm Tuesday, the bullion commenced a major bounce from three-week highs yesterday and closed the US session around the monthly pivot point (1,241.50). However, a selloff has continued this morning on the back of growing risk appetite worldwide. Now the weekly pivot is under bearish pressure, but the bulls hope the 55-day SMA (1,223.48) along with the weekly S1 (1,221.33) will be capable of limiting those negative changes. Otherwise, we would not rule out a slump towards the March low at 1,208.06.Daily chart
In the one-hour chart the state of affairs is very tricky at the moment. Earlier Thursday's losses have put the spot under the 200-hour SMA, currently at 1,237. However, the April 1-6 uptrend remains largely intact and the bulls are relying on it. In case of consolidating under this support, the eyes will be set on the upper bound of the March-made falling wedge pattern near 1,212. This line is connecting the main March peak with several other apexes from the same month.
Hourly chart
Market sentiment grows in the wake of price losses
In the meantime, OANDA clients are 58% long on gold today. The bulls have increased their portion by one percentage point over the past 24 hours of trading. However, bullish market participants of the SAXO Bank market failed to defend their slim advantage over the bears. In the morning of April 14 about 50.5% of all transactions are short and only 49.5% of them are betting the yellow metal will soar.