- Bullish-bearish gap is decreasing slowly, but still only 39% of positions are bullish
- 55-day SMA is expected to endorse bullish traders, as failure here will result in deterioration of outlook
- Daily indicators preserve their neutral stance; however, fresh weekly signals are overwhelmingly bullish
- Economic events to watch over the next 24 hours: Italian Trade Balance (Feb); US Industrial Production (Mar), Empire State Manufacturing Index (Apr) and Preliminary Consumer Confidence Index (Apr); FOMC Member Evans Speaks; Canadian Manufacturing Sales (Feb)
Gold headed for its first weekly decline in three as the US Dollar strengthened and global equities curtailed appetite for the safe-haven metal. Assets in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, dropped to 806.82 tonnes on Thursday, the lowest in a month. US consumer prices climbed modestly in March for the first time in four months, while the number of Americans filing for unemployment benefits unexpectedly fell last week to match its lowest level since 1973, in the latest sign of a strong labour market.
China's economy grew by 6.7% year-on-year in the first quarter of 2016. This is the slowest pace since the depths of the global financial crisis in 2009. Growth in gross domestic product was in line with expectations, but down slightly from the 6.8% reported for the December quarter of 2015, according to the figures released by the China's National Bureau of Statistics. Despite the slight deceleration in growth, analysts suggested that the economy had a "good start" to the year, since the outlook has improved with both the manufacturing and property sectors rebounding strongly. Alongside the GDP report, the NBS also released industrial output and fixed asset investment reports. Data showed that fundamentals in March were much stronger than forecast, suggesting that growth would pick up in the next quarter. Industrial output increased by 6.8% from a year earlier, a sharp acceleration on the 5.4% pace of February, which is well ahead of anticipated increase of 5.9%. In the meantime, fixed assets investment overshot the expected growth of 10.2% and rose by 10.7%. Consequently, a solid performance by the world's second largest economy would help to improve global demand, since the increase of GDP by 6.7% means that China is contributing as much as the US in terms of global growth in the first quarter.
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.
Upcoming fundamentals: US production output to flatten in March
Industrial production and capacity utilisation data for the US for March is due today at 13:15 GMT. Economists suspect that the output is going to be unchanged on a monthly basis, but the figures will follow a decrease of 0.5% in February. Capacity utilisation is set to fall down, signalling that conditions for manufacturing companies remain quite challenging. Separately, the Empire State (New York) manufacturing survey is coming out at 12:30 GMT. After a surprising spike above zero for the first time in eight months in March, the index is set to grow further to 1.90 points in April. In the meantime, Chicago Fed President Charles Evans is going to speak today at 16:30 GMT at JP Morgan Investor Seminar.
Gold hits 55-day SMA, eyes rebound from here
The bullion posted another ultra-negative session on Thursday, by slumping as low as 1,229 by the end of US trading. Yesterday it eroded the weekly pivot point and the 20-day SMA resting around 1,232/35, thereby refocusing our attention to the formidable demand is face of the 55-day SMA at 1,225. We estimate no immediate failure of the bulls in recovering from here, meaning some bullishness is possible today. It is also indicated by strongly long weekly technical indicators. However, any descent below the moving average is going to affirm that gold maintains a clear medium-term selling mode.Daily chart
Looking at the one-hour chart, we have no ground for optimism over there. Gold prices are now resting under the earlier April uptrend, which finds its current location at 1,232. In addition to that, the 200-hour SMA is now acting as an officially confirmed support line. Bearish views desire an extra selloff in the direction of 1,208 where they are going to find a downtrend line connecting the March high with several other peaks from the same month.
Hourly chart
Market sentiment grows in the wake of price losses
In the meantime, OANDA clients are 59.14% long on gold today. The bulls have increased their portion by about one additional percentage point over the past 24 hours of trading. Moreover, bullish traders of the SAXO Bank market managed to perform a firm comeback yesterday. After spending one day in a slight minority, they surged back to 55% by Friday morning.