- 73% of all SWFX positions are short, the widest share in 10 weeks
- Bulls to attempt pushing gold back above weekly S1 at 1,269.33; risks are still skewed to the downside
- Daily and next week's technical signals are bullish
- Economic events to watch over the next 24 hours: FOMC Member Dudley Speaks; US JOLTS Job Openings (Mar) and Wholesales Inventories (Mar); RBNZ Governor Wheeler Speaks; RBNZ Financial Stability Report; UK Trade Balance (Mar)
Gold traded near the lowest level in more than a week on Tuesday, being after pressure after suffering its sharpest decline since March in the previous session as the US Dollar remained firm, curtailing appetite for bullion. The steep drop came after the precious metal snapped four days of losses on Friday when the payrolls data showed that the US economy created the fewest jobs in seven months in April, leaving some economists predicting only one interest rate lift from the Fed this year.
The Fed's own labour market conditions index recovered last month in line with expectations, marking its highest level of the year thus far. The Labor Market Conditions Index climbed to -0.9 points in April, virtually matching economists' forecast for -1 point, and following an unrevised -2.1 points in March, according to the Fed's Board. The gauge averaged -2.2 points in the first quarter. Last week's non-farm payrolls report showed the world's biggest economy created the fewest number of jobs in seven months and Americans dropped out of the labour force, casting doubts on whether the Fed will hike interest rates before the end of the year. According to the Labor Department, non-farm payrolls rose by 160,000 jobs last month as construction employment barely climb and the retail sector shed jobs. That was the smallest gain since September and below the first-quarter average job growth of 200,000. Moreover, employers appeared to add 19,000 fewer jobs in February and March than previously estimated. While the unemployment remained unchanged at 5.0% it came at cost of people dropping out of the labour force. The share of Americans participating in the labour force dropped to 62.8% in April from 63.0% in March.
China's consumer inflation held steady in April, giving the People's Bank of China more room to ease monetary policy as the world's second-biggest economy combats tepid demand. According to the National Bureau of Statistics, China's consumer-price index increased 2.3% from a year earlier in April, unchanged for the third month in a row with higher vegetable and pork prices offset by lower fruit and egg prices. However, the CPI figure undershot a median 2.4% gain projection. Food prices account for approximately one-third of the weighting used to calculate China's CPI, thus higher pork prices is likely to keep consumer inflation above 2% until early 2017. Concerning producer prices, deflation is set to remain for some time, due to the effect lower global commodity prices have had on industrial input costs. China's Producer Price Index dropped 3.4% on year in April, the lowest level of deflation in 16 months and compared with March's 4.3% plunge. Chinese producer prices have been deflationary for four years now. China's manufacturing PMI data also suggest there has been less deflationary pressure on factories in recent months. The Caixin-Markit China manufacturing PMI showed that input costs rose at the quickest pace since January 2013 last month, which in turn boosted the fastest increase in output charges since October 2011.
Upcoming fundamentals: UK foreign trade conditions to stay tough in March
Over the previous few months the UK balance of trade has been registering growing deficit levels, with February data showing a shortfall between exports and imports of almost 12 billion pounds. Visible trade balance is anticipated to improve marginally in March, up to -11.45 billion pounds. Meantime, Governor of the Reserve Bank of New Zealand Graeme Wheeler is scheduled to talk at 21:05 GMT later today. His speech will be preceded by the central bank's financial stability report release at 21:00 GMT.
Gold risks retreating down to 1,250 zone
While provided with massive downside momentum around the weekly pivot point and monthly R1 at 1,286/87, the bullion was sold-off at the steepest pace since late-March. The spot closed below the weekly S1 (1,269.33) and the April 29 low, thereby shifting expectations further down. In case the 20-day SMA fails to cap an initial decline at 1,261.57, then the only reliable support will be found between 1,251.62 and 1,246.32. There gold is supposed to encounter the weekly S1, monthly pivot point and 55-day SMA. In the meantime, the longs are hoping to recover at least the minimal loss beyond the weekly S1.Daily chart
The outlook is now biased in favour of the bearish camp, given that the current market price is now placed below the 200-hour SMA (1,279.25) in the 1H chart. Consolidation will be affirmed, in case on Tuesday XAU/USD remains at levels that are located strongly under the moving average. The nearest line to emerge as the most immediate support is a mild late-April uptrend at 1,254. However, the bears may not refrain from attempting to dampen gold prices as low as 1,227.34 (April 22 low) over the next few days.
Hourly chart
More SWFX traders see gold lower
Despite that, OANDA clients are now clearly awaiting a rebound. Now about 60% of all their positions are set long on the bullion, up from less than 56% some 24 hours ago. Alongside, SAXO Bank market participants are positive in almost 58% of all cases.