Gold ignores sell off and moves higher

Source: Dukascopy Bank SA
  • 55% of all SWFX open positions are bullish, the highest number in 17 weeks
  • Prices are stable at 1,215
  • Bullion's general direction is upward as a new pattern is formed
  • Economic events to watch over the next 24 hours: US Initial Jobless Claims (May 28); ADP Employment Change (May); DOE Crude-Oil Inventories (May 27)

© Dukascopy Bank SA
Gold seems to have fully rebounded and not just fluctuated, as the yellow metal suffered from some sell offs that started in the middle of Wednesday's trading session when the bullion was at $1,218.45, but regained losses after a while and reached the $1,215.77 mark. Focus is turning to the ADP Employment Change data, which will indicate to the US labour market conditions and thus provide insight into strength of the US Dollar, which highly affects gold prices. In addition, DOE Crude-Oil Inventories could affect the prices of all commodities.

The data for US ISM manufacturing data was stronger than analysts' estimations showing an advance to 51.3 (May) from 50.8 booked in the previous month. The consensus expectation, in turn was 50.5. Economic activity in the manufacturing sector expanded in May for the third consecutive month, while the overall economy grew for the 84th consecutive month, according to the ISM report. The Prices Index in turn, registered 63.5, an advance of 4.5 points from the April reading of 59, indicating higher raw materials prices for the third consecutive month. The main influence on the PMI release was raised due to the decline in production volumes. The following release shows that the sector expanded in May for a third straight month, despite the forecasts of a negative movement following several weak regional surveys. Of the 18 manufacturing industries, 12 are reporting rise in May. The top gainers are wood products, textile mills and printing & related Support Activities. However, the six industries, in turn, reported contraction in May which are: apparel, leather & allied products and petroleum & coal Products. Speculation in recent weeks that the US Federal Reserve will raise interest rates in the next few months, concerns about Chinese economic growth as well as worries about possible British exit from the European Union, are all factors that affect global manufacturing.


Australia's economic growth boomed past expectations in the first quarter with the annual pace speeding to its fastest in three years, a result that could keep the central bank on hold at its policy meeting next week. Gross domestic product grew a seasonally adjusted 1.1% in the three months to the end of March, exceeding market expectations for a 0.8% gain in the first quarter, due to a strong pickup in resources and services exports. On an annual basis, GDP grew 3.1%, above economists' consensus estimate for 2.8% growth and defying fears that Australia would be hit by slowing growth in China, its biggest trading partner. According to the Australian Bureau of Statistics, the major drivers of growth during the quarter came from exports and household final consumption expenditure, which contributed 1.0 and 0.5 percentage points respectively. Combined with a marginal fall in imports, net exports contribute a whopping 1.1 percentage points to growth during the quarter. These gains were partially offset by weaker public gross fixed capital formation, which shaved 0.4 percentage points from the number. However, a real net national disposable income, increased by just 0.2% during the quarter after seasonal adjustments, seeing the yearon year decline accelerate to 1.2%. This is seen as a measure of the real standard of living of Australians, and on that measure the economy is not as strong as the real GDP figure would suggest.

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Upcoming fundamentals: US labor data and crude inventories



Most fundamentals affecting the yellow metal are coming from the US today, as ADP Employment Change and Initial Jobless Claims will give insight into the US labor market and how much it can affect the US economic strength. In addition to that, gold might be moved by changes in oil prices, as they could be affected by unexpected changes in DOE Crude-Oil Inventories.


Gold gains more strength

Daily chart: After rebounding on Tuesday from $1,206 to $1,214, the bullion suffered minor losses on Wednesday and ended the day's session at $1,212, as it bounced off the 100-day SMA at $1,218. However, on Thursday the metal started rallying again and at the moment is placed at $1,214, by slowly moving back to the 100-day SMA, which is now located at $1,220. If the yellow metal breaks through this resistance, it will face the weekly PP of $1,224, which is the second weekly resistance. In the meantime, it may also move to the first weekly support at $1,207. Aggregate technical indicators predict a downfall for gold today.

Daily chart
© Dukascopy Bank SA

Hourly chart: The bullion's hourly chart indicates that the bulls made a sell off yesterday and cashed in on their gains, making the commodity drop from 1,218 to the March low of 1,207. However, on Thursday the yellow metal has been steadily gaining strength with a rebound from the March low to trade around 1,214 with a daily channel up pattern, which will probably move the metal to around 1,218.

Hourly chart
© Dukascopy Bank SA

SWFX market sentiment turns positive on gold

More than 55% of all SWFX positions are bullish, which is a 17-week high that indicates at a change for the metal and possible further movement upwards.

Meanwhile, OANDA and SAXO Bank clients are still even more positive than SWFX traders with respect to the bullion, precisely in 70.66% and 63.06% of all cases, respectively, in the morning on June 2.

















Spreads (avg,pip) / Trading volume / Volatility


Market participants foresee the price of gold at 1,275 by the end of August

Traders who were asked regarding their longer-term views on gold between May 2 and June 2 expect, on average, to see the metal around 1,275 by the end of August. Generally, 54% (-2%) of participants believe the price will be generally above 1,250 in ninety days. Alongside, 30% of those surveyed reckon the price will trade in the range between 1,100 and 1,250 over the next three months.

© Dukascopy Bank SA

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