- 64% of all SWFX positions are short (58% yesterday)
- Primary bullish goal is March high at 1,284.53 on Friday
- Both daily and weekly technical indicators are pointing to the upside
- Economic events to watch over the next 24 hours: German Retail Sales (Mar); French CPI (Apr) and GDP (Q1); Spanish (GDP); Swiss KOF Leading Indicator (Apr); SNB Chairman Jordan Speaks; Euro zone GDP (Q1), CPI Estimate (Apr) and Unemployment Rate (Mar); US Personal Income and Personal Spending (Mar), Chicago PMI (Apr) and Final University of Michigan Consumer Confidence Index (Apr); FOMC Member Kaplan Speaks; Canadian GDP (Feb)
Gold traded near its highest level in a week on Friday and was set for its biggest weekly climb in eight as the US Dollar dropped after the Bank of Japan and the Fed kept their monetary policies unchanged. Assets in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, increased 0.19% to 804.14 tonnes on Thursday.
The US economy expanded in the first quarter at the slowest pace in two years due to a sharp pullback in business investment and sluggish global demand. Gross domestic product rose at a 0.5% seasonally adjusted annual rate in the first quarter, according to the Commerce Department. This is the government's first of three estimates for the quarter before annual revisions in July. Consumers and the housing market kept the US economy from sliding backward, albeit only barely. Among the forces working against the US growth in recent months was a lacklustre demand from overseas and a strong Dollar that have led to a decline in exports, subtracting from growth. After its meeting earlier in the week, the Fed provided a mixed review of the economy, saying in its statement that economic activity had slowed despite labour market improvement. Though the US central bank had entered the year with the plan to hike interest rates several times, it has so far refrained from any moves, a response to overseas volatility, particularly in China, and to the contradicting signals about US economic health. Analysts say the Fed could still decide to raise interest rates at its next meeting in June. The International Monetary Fund, in mid-April, estimated that the US economy would grow by 2.4% this year, slightly better than the pace of other developed economies.
The Fed opted not to hike interest rates and remained ambiguous about raising rates in June amid moribund economy and weakening consumer spending. The US central bank proceeded with its plan to move cautiously on raising the benchmark federal-funds rate, which has been between 0.25% and 0.50% since December, when the Fed increased short-term rates after keeping them near zero since 2008. Policy makers pointed that the US economy is performing robustly in some respects, but continuing to falter in others. Household spending has diminished even though real income has increased and consumer sentiment remains high, while the labour market conditions have improved further. The Fed's caution underlines how policy makers still lack confidence they can move away from extraordinary easy-money policies without derailing the fragile US growth and knocking the global economy off balance. The seven weeks until the June meeting could help determine how many times, if any, the Fed will hike short-term interest rates this year. Policy makers will get two months of inflation and labour-market data as well as two estimates of first-quarter growth before their next meeting. One major source of uncertainty for policy makers is the UK's referendum over whether to leave the EU, which is scheduled for June 23, a week after the Fed meets.
Upcoming fundamentals: US personal income and spending to grow for second month
In the wake of this week's disappointing US statistical data, Friday's personal spending and income figure may provide some relief to extremely bearish sentiment on the Greenback. They both are out at 12:30 GMT today and analysts' expectations suspect that income has grown by 0.3% in March and spending added 0.2% over the same month. At 14:00 GMT the University of Michigan will release its final April reading for consumer confidence index, as economists are awaiting some upgrade to 90 points from 89.7 forecasted earlier. Alongside, the Chicago PMI is due slightly later at 14:45 GMT.
Gold to set eye on March high at 1,284.53
The bullion booked a tremendous rally on Thursday, as a very decisive bullish action managed to close the daily trading above the most important resistance of 1,258/63 represented by the weekly R1 and February high. Boosted by weaker US Dollar, gold is now fluctuating at peak levels since mid-March. We give a quite uplifted likelihood to a testing of the March high at 1,284.53, which is backed by the weekly R2 at 1,286. While technical indicators on daily/weekly time frames are strongly positive, we would not rule out a mid-term spike towards the channel's trend-line and 2015 high at 1,307.Daily chart
From the perspective of gold price developments in the 1H chart, it is likely that a climb will soon come to an end. This is because the precious metal is facing a resistance in face of the upward-sloping trend-line at 1,279.42, which is connecting the March 30 and April 21 highs. Additionally, this supply is reinforced by the March high at 1,284.53. They both are primary bullish targets, while a success here would open the way for further purchases.
Hourly chart
Take-profit trades push bullish market share down
Percentage of long positions continued to diminish in the OANDA market where it tumbled to less than 55% from 59% yesterday. In the meantime, SAXO Bank sentiment has seen a considerable shift in favour of the bears, as this market is now 57% short on gold (only 47% yesterday).