- Only 53% of all SWFX positions are short, down by 17% over last five days
- Bears to target the 100-day SMA at 1,213.81, which is guarded by Bollinger band and weekly S2 from the north
- Daily technical indicators are mixed
- Economic events to watch over the next 24 hours: German IFO Business Climate (May); FOMC Members Harker, Kashkari and Kaplan Speak; US International Trade Balance in Goods (Apr) and Crude Oil Inventories (May 20); Bank of Canada Interest Rate Decision
Gold declined to the lowest level in seven weeks on Wednesday amid expectations of an early interest rates hike by the Fed. The US Dollar stood near a two-month high versus a basket of major currencies on Wednesday after robust US housing data. US new-home sales surged the most in more than eight years while prices advanced to a record level, pointing to healthy demand alongside limited supplies across the housing market. Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, slid 0.44% to 868.66 tonnes on Tuesday, the first decline in a month.
US new-home sales surged the most in more than eight years while prices advanced to a record level, pointing to healthy demand alongside limited supplies across the housing market. Purchases of new, single-family homes soared 16.6% in April from a month earlier to a seasonally adjusted annual rate of 619,000, according to the Commerce Department, adding to signs of growing confidence in the economy's prospects. That was the quickest pace since January 2008. Moreover, data for February and March were revised to show 39,000 more units sold than previously reported. Economists had predicted new home sales, which make up about 10.2% of the housing market, increasing to only a 523,000 unit-rate last month. The median price of a new home rose to $321,100 in the reported month. That was up 9.7% from a year earlier and the highest level on record. The new home sales report came in the wake of fairly positive data on home resales and residential construction. It also added to retail sales and industrial output reports in suggesting that the world's number one economy was gaining momentum after growth slowed to a 0.5% annualized rate in the first quarter.
Bank of England Governor Mark Carney defended the central bank's decision to highlight the risks of exiting the European Union, coming under renewed accusation from a lawmaker, who has been attacking Carney brutally on his role in the Brexit debate. Carney said the BoE sees Brexit as the biggest domestic risk to financial stability, and agreed that Brexit could cause the Pound to fall, creating an upside shock to inflation that would make it harder to keep interest rates low. The Governor said that if the UK stays in the EU, the next move in interest rates would probably be up. However, if Britons vote to leave the EU, there is a lower chance of a hike. Deputy Governor Ben Broadbent pointed out that the UK economy appears to have slowed quite sharply this year, while it is unclear how much of the slowdown was triggered by the Brexit concerns. Jacob Rees-Mogg, a eurosceptic lawmaker, who has previously blamed Carney of venturing into politics with his Brexit warnings and urged him to resign, kept up his criticism. At the same time Andrew Tyrie, chairman of the committee quizzing Carney and other BoE officials, said lawmakers would have criticized the Governor if he had stayed silent on Brexit. Prime Minister David Cameron and finance minister George Osborne are leading the campaign to keep the country in the EU. The finance ministry has issued similar warning to Carney.
Upcoming fundamentals: BOC expected to hold rates steady with dovish forward guidance
Bank of Canada will announce its interest rate decision at 14:00 on Wednesday. Analysts forecast that the benchmark will be left unchanged at the present level of 0.50%; however, a recent streak of poor fundamental data and wildfires in the province of Alberta will put pressure on the central bank's policy. Somewhat dovish stance is not ruled out and the BOC may start guiding the market towards future easing. Meanwhile, at 13:00 GMT the Philadelphia Fed President Patrick Harker will talk at the economic forum in Philadelphia. Minneapolis Fed President Neel Kashkari will speak on monetary policy in North Dakota at 15:40 GMT, while Dallas Fed President Robert Kaplan will participate in a Q&A session in Houston. All of them are non-voting FOMC members this year.
Gold crushes as Dollar rises on Fed bets
Daily chart: The bullion posted the most bearish trading session since March 23 yesterday, by losing about $22 from its day's open price. It was falling down until the very end of the US session and closed without any bullish attempt to recover the losses at the 1,226 mark. XAU/USD confirmed the closest monthly/weekly S1 supports at 1,235/34 and thus refocused attention to the next bunch of demand levels near 1,218/13. Here gold will face the lower Bollinger band, weekly S2 and upward-sloping 100-day SMA that should be able to hold initial bearish test.Daily chart
Hourly chart: Since at least Monday of this week the precious metal has been showing willingness to confirm the bearish trend-line of the descending channel pattern and abandon the idea of growth. The key watch is now on the March low placed at 1,207.75. Despite that, the metal will have a chance to recover on Wednesday, but a failure to do that on March 25 will inevitably diminish bullish expectations.
Hourly chart
Bullish market portion soars to 47%
Meanwhile, OANDA and SAXO Bank clients are overwhelmingly positive with respect to gold, precisely in 65.76% and 66.11% of all cases, respectively, in the morning on May 25.