- 66% of all SWFX positions are short, the lowest number in 13 days
- Outlook remains negative, as correction below 55-day SMA will back the bearish case even more
- While daily technical signals are mixed, next week's studies are strongly positive
- Economic events to watch over the next 24 hours: US Existing Home Sales (Apr); FOMC Member Tarullo Speaks; Canadian Retail Sales (Mar) and CPI (Apr); G7 Meetings in Japan
Gold stabilized following two days of losses on Friday, but was set for its biggest weekly decline in eight weeks amid a stronger US Dollar and indications from the Fed that it could hike interest rates as soon as next month. The number of people seeking US jobless aid plunged from a 14-month high during the last week. US initial applications for state unemployment benefits dropped 16,000 to a seasonally adjusted 278,000 for the week ended May 14. Holding in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund climbed 0.52% to 860.34 tonnes on Thursday.
Canadian wholesale sales declined for a second consecutive month in March, led by lower motor vehicle and food sales. According to Statistics Canada, the value of Canadian wholesale trade dropped by 1.0% in March to a seasonally adjusted 54.56 billion Canadian dollars, compared to economists' expectations for a 0.5% fall. Lower sales were recorded in five of seven subsectors, making up for 65% of total wholesale trade. In volume terms, sales fell by 0.4%. The motor vehicles and parts subsector slipped by 2.5% to C$10.28 billion, its lowest level in four months as vehicle sales fell. Moreover, Statistics Canada revised February's month-on-month decline to 2.3% from an initial 2.2%. While wholesale data often get less attention than other economic measures, wholesalers make up the biggest portion of the Canada's services sector, which in turn accounts for around two-thirds of overall economic output. The Canadian GDP outlook remains fairly bleak for March, especially in light of several discouraging macro-data published earlier. Statistics Canada showed that manufacturing sales tumbled 0.9% to C$50 billion amid weakness in the transportation equipment and primary metals industries. The March GDP figure, which is due at the end of May, will be accompanied by the quarterly economic growth statistics. Thus far, February's GDP proved to be weak, contracting 0.1% after a jump of 0.6% in January.
Japan's core machinery orders increased more than expected in March but firms predict orders to drop in the current quarter as companies become increasingly cautious due to a surging Japanese Yen and weakness in overseas economies. Core orders, a leading indicator of business investment, surged 5.5% from the previous month, stronger than a 0.7% increase expected by economists. On a an annual basis, core orders surged 3.2%. For the quarter, core orders gained 6.7% in the three months to March from the previous quarter, but are predicted to decline 3.5% in the April-June period. The projected fall in machinery orders in the second quarter comes amid concerns that the appetite for investment will wane due to the likelihood of slower global growth. Business investment has been moderately improving in the past few years but is yet to return to levels seen prior to the global financial crisis despite efforts by Prime Minister Shinzo Abe to urge firms to spend more for future growth. Policy makers are relying on an increase in capital expenditure to boost gains in productivity, create new jobs and increase wages. Gross domestic product data for the first quarter showed household spending lacked strength and capital expenditure declined, a worrying sign that domestic demand could falter.
Upcoming fundamentals: Canadian inflation to surge in May
A bulk of Canadian fundamental statistics is due at 12:30 GMT later on Friday. Retail sales for March and inflation for April are both up for revision this time. The former are expected to plunge by 0.6% and 0.4% on headline and core bases, respectively. Both indicators had registered an increase in February. As for the consumer price index, the annual headline reading is set to soar to 1.7% from 1.3% in April of this year. Core CPI is forecasted to decrease slightly to 2% from 2.1%, provided that monthly indicators advance in line with analysts' projections.
Gold resisted by 55-day SMA from below
Gold prices continued to diminish on Thursday, as the weekly S1 at 1,257.01 was successfully confirmed. However, when the bullion reached the 55-day SMA and attempted to breach this line, it was immediately rejected and sent back to the upside. The session closed with a decent bullish comeback. Nevertheless, the short-term outlook is negative, while a drop below the mentioned moving average will only strengthen the bearish case and will reset eye on the 100-day SMA/March low at 1,209/07. However, fresh weekly technical signals suggest gold is oversold and the purchases should resume.Daily chart
In the 1H chart we see the bullion moving gradually down towards the April 22 low at 1,226.94. It settled below the 200-hour SMA yesterday after multiple days of fluctuation around this moving average line. As indicated by the May 2-16 downtrend line, the overall direction of the precious metal has been sloped to the south this month. For the moment there are few technical reasons to believe the immediate recovery will take place soon.
Hourly chart
Bullish market portion at 13-day high
Meanwhile, OANDA and SAXO Bank clients are overwhelmingly positive with respect to gold, precisely in 62% and 60% of all cases, respectively, in the morning on May 20.