- Long and short SWFX positions are equally distributed between traders
- Fed interest rate hike expectations expected to weigh on prices in the mid-term
- Daily and weekly technical indicators maintain mixed views on gold
- Economic events to watch over the next 24 hours: French GDP (Q1); Swedish GDP (Q1); German CPI (May); Canadian Current Account (Q1); Japanese Unemployment Rate (Apr) and Industrial Production (Apr); Australia Building Approvals (Apr)
The US economy slowed in the first quarter although not as sharply as initially thought, amid a surge in spending on home building and a steady increase in inventory investment by businesses. According to the Commerce Department report released on Friday, the broadest measure of the US economic performance, expanded at an 0.8% annual rate between January and March compared to the previous reading of 0.5%. Despite the nation's gross domestic product in the first quarter of the year positive tendency, the indicator remains at its lowest level since the first quarter of 2015. Overall, the US economy has been hurt by a strong dollar and sluggish global demand, which have eroded export growth. However, there are signals that the US economy will rebound in the second quarter, with retail sales, goods exports, industrial production, housing starts and home sales soaring in April. In the meantime, during the Fed Chair press-conference, Janet Yellen gave a big hint that interest rates could be raised in June or July. Moreover, the Federal Reserve did not see the financial crisis coming, even though there were apparent clues. Yellen's comments renewed the market's conviction that the second rate hike of this cycle is approaching. Treasuries fell, while stocks, in turn, slipped to the lowest levels of the day.
Japanese retail sales dropped in April for the second consecutive month, on the back of falling fuel prices and lower sales of household electronics, bolstering the argument that a nationwide sales tax increase scheduled for April next year should be delayed. The Ministry of Economy, Trade and Industry reported that retail sales slipped 0.8% on year-on-year basis in April, after a revised 1.0% drop in the previous month, while the median market forecast stayed for a 1.2% annual decline. On month, retail sales were flat after seasonal adjustment, and data showed that recent sales have fallen on an annualised basis for five of the past six months. Retail sales, a proxy for consumer spending, are declining at a time of great uncertainty for the Japanese economy. Japan barely avoided recession in the first quarter, but has fallen back into deflation, stoking fears that the government is running out of options to stimulate the economy. Prime Minister Shinzo Abe told finance leaders at last week's Group of Seven summit that there is a significant risk of the world economy falling into a crisis on the scale of the 2008 financial crisis if the right policy measures are not taken. This includes, among other things, delaying a planned sales tax hike. According to reports Shinzo Abe plans to delay the increase to October 2019, some four years later than originally scheduled, to sustain Japan's economic recovery.
Upcoming fundamentals: Japanese industrial output set to drop again
Asian and European news will prevail over American statistics, given that US markets are fully closed on Monday and Canada will only publish the current account data at 12:30 GMT. In Japan, the unemployment rate is out at 11:30 GMT and is forecasted to stay steady at 3.2% in April. Alongside, the country's industrial production statistics is due 20 minutes afterwards, where the market foresees a monthly decline in output of 1.5% and a slump of 5.2% on a year-to-year basis. The data will follow positive changes seen back in March. Meanwhile, Australian building approvals for April are up at 1:30 GMT in the early morning on Tuesday. Analysts assume the number of housing approvals will fall by 3% in April after a 3.7% spike in the previous month. However, they will continue decreasing steadily on an annual basis.
Gold plummets for nine consecutive days
Daily chart: The bullion sees no end to its massive losing streak, as on Monday the metal continues to slide down with the March low at 1,207.87 tested successfully. Current trading levels indicate gold is offered at the cheapest price since February 22 and is 6% down over the last nine trading days, while the 1,200 psychological mark is substantially exposed to bearish pressure. In case XAU/USD closes below the March low today, the base attention will switch to the ultra-important years' 2013-2015 downtrend, currently at 1,186.35.Daily chart
Hourly chart: The steady and stable downward tendency affirms the precious metal inside the channel down pattern. Currently, however, it is reasonable to estimate an upward correction in the direction of the 1,215/20 area, since gold has just reached the lower boundary of the pattern. Nevertheless, a continuous negative weight will be put by the 200-hour SMA (1,240.58) alongside the March low.
Hourly chart
SWFX market sentiment turns neutral
Meanwhile, OANDA and SAXO Bank clients are overwhelmingly positive with respect to gold, precisely in 67.78% and 63.64% of all cases in the morning on May 30.