- 68% of all SWFX positions are short today
- Daily time frame suspects a rally up to weekly R1 at 1,287.68; one-hour chart's estimates are far less optimistic
- Daily and weekly technical signals are bullish
- Economic events to watch over the next 24 hours: Swiss PPI (Apr); Italian Trade Balance (Mar); US CPI (Apr), Housing Starts (Apr), Building Permits (Apr) and Industrial Production (Apr); FOMC Members Williams, Lockhart and Kaplan Speak; UK CPI (Ape); New Zealand PPI (Q1) and Global Dairy Prices; Japanese GDP (Q1)
Gold gained on Tuesday as the US Dollar weakened, but a lid was put on precious metal's gains amid a recovery in Asian equities from two-month lows. However, bullion was supported by news that billionaire investor George Soros and other big funds started buying the precious metal for the first time in years. Assets of SPDR Gold Trust, the world's top gold ETF, have been increasing gradually this year and are at their highest since November 2013.
Official data showed that the New York Federal Reserve's index of manufacturing conditions contracted for the first time in three months in May, as new orders and shipments turned negative. The general business conditions index fell to -9 in May, contrary to analysts' prediction of a modest pullback to 6.5 points from April's 9.56 points. The previous reading had been the indicator's highest since January 2015. The figures suggest that factories in the state continue to struggle despite growth in March and April. Factory output nationwide has been sluggish in the past year as a weak global economy has lowered exports and US businesses are spending less on equipment and machinery. The new orders and shipments indexes also pointed to a decline in both orders and shipments. A measure of new orders fell to –5.5, from 11.1 the previous month. Also, a gauge of shipments slipped into negative territory, falling to minus 1.9 from 10.2. Moreover, employment levels appeared to be little changed, while the average workweek index pointed to a decline in hours worked. Thus, the so-called Empire State index suggests that the recovery from the US manufacturing recession will be sluggish at best. The average for the second quarter thus far, at 0.27 points, is slightly better than the -11.8 points logged in the first quarter.
US retail sales surged the most in a year in April as Americans boosted purchases of automobiles and a range of other goods, suggesting the economy was regaining momentum after growth almost stalled in the first quarter. According to the Commerce Department, retail sales advanced 1.3% last month, the largest increase since March 2015. March's retail sales were revised up to a 0.3% decline compared with the previously reported 0.4% drop. Stripping out automobiles, gasoline, building materials and food services, retail sales climbed 0.9% in April following an upwardly revised 0.2% gain in March. If consumers can spur stronger economic growth in the coming months, that could influence the Fed's decision on when to hike its benchmark interest rate. Macroeconomic Advisers revised its expectation for second-quarter GDP growth to a 2.3% annualized increase from 2%. Barclays raised its forecast to 2.2% from 2%. The Federal Reserve Bank of Atlanta's real-time estimate of economic growth moved to a 2.8% rise, from the prior estimate of 2.2%. Separately, consumer confidence rebounded to its strongest level in nearly a year in May. The University of Michigan preliminary consumer sentiment index for May came in at 95.8, compared with a final April reading of 89.0.
Upcoming fundamentals: Japanese upcoming GDP – is the worst over?
Judging from the mean expectation among analysts surveyed, the third largest global economy has most likely escaped the technical recession in the first three months of this year. GDP data will be due at 23:50 GMT during the late evening session on Tuesday. After three quarters of economic slowdown, Japan is forecasted to register a minimal 0.1% quarterly expansion, which will push the annual GDP reading up to 0.3%. In October-December period the country's GDP slumped by 1.1% year-on-year and by 0.3% quarter-on-quarter. Meantime, several members of the Federal Open Market Committee are set to speak over the second working day of this week. Speakers will mainly include non-voting members of the committee.
Gold gives up at weekly R1 amid risk-on mood
After testing the most immediate daily resistance line, which is represented by the weekly R1 at 1,287.68, the bullion was forced to erase these intraday gains amid growing risk appetite over the US equity session on Monday. XAU/USD dived down to the weekly pivot at 1,272.24, where it is estimated to get a second chance to appreciate on May 17. Successful tackling of the weekly R1 would reestablish the possibility of a fresh rally beyond the psychological 1,300 marker. Meanwhile, bullish scenario is backed both by daily technical studies and a heavy support at 1,266 (monthly PP; 20-day SMA).Daily chart
Looking at the one-hour chart, gold's first attempt to penetrate the March upper downtrend was deeply unsuccessful. The bulls failed to build ground after crossing the 1,284 level on Monday. However, more strength is not fully ruled out, as XAU/USD is underpinned by some major demand at the 200-hour SMA (1,274.38). Nevertheless, the base scenario would still continue expecting a medium-term downward change towards the broadening falling wedge pattern's lower boundary, which rests under 1,240.
Hourly chart
Market sentiment revives to 4-day high
Meanwhile, OANDA clients are overwhelmingly positive (62.9%) with respect to gold, up from 62.6% yesterday. On top of that, 52.3% of SAXO Bank clients are betting the metal will grow in price.