- 67% of all SWFX open positions are bearish
- Prices fluctuating around 1,280 level
- Gold started a new week lower than previous close
- Economic events to watch over the next 24 hours: US Fed's Kashkari's Speech; BoJ Minutes; RBA Minutes
US Federal Reserve was forced to keep the target range for the Federal Funds rate flat at 0.25-0.50% after its June 14-15 meeting, owing to continuous risks to economic outlook and stagnating inflation expectations. Domestic data has been uneven recently, with mild payrolls report considered to be the key trigger for accepting the status-quo. All member of the Federal Open Market Committee (FOMC) voted for the decision, with Kansas City Fed President Esther George abandoning her hawkish call to raise the benchmark by 25 basis points. Janet Yellen, the Chair, agreed that there are some downside forces to interest rates that may be longlasting. On the short-term basis, she admitted that the upcoming UK referendum on EU membership has weighed on the Fed's decision to postpone the upward revision to the Fed Funds target range. The famous dot plot, which reveals individual members' perceptions of how interest rates are going to evolve in the future, showed that participants continue eyeing two interest rate hikes in 2016 and three in 2017. The terminal rate for the long run has shifted down to 3% from 3.3% in the March projection. The Fed estimates a 2% GDP growth every year during 2016-2018, also reflecting a moderate downward change in the outlook. Consumer prices, measured by the PCE Index, however, are forecasted to increase 1.4% this year. This indicates to an improvement from 1.2% seen three months ago.
As reported by the US Census Bureau, there were 1.164 million constructions of residential buildings started in the US in May. The data beat expectations of 1.15 million, while still being below the April's reading of 1.172 million. During the previous month there was a sharp increase in the construction, but a lot of homes on the market became less affordable, amid a rather sharp increase in prices for those homes. Mortgage rates, however, are at low levels, somewhat boosting demand for apartment and house acquisitions, but, nonetheless, for some prices remain too high. Single-family houses have a higher impact than apartments, as they provide a larger economic boost and they rose 0.3% up to 764,000, while apartments showed only 396,000 residences, thus, barely changed compared to the previous month's data. Furthermore, only 1.138 million building permits for construction were issued in the US last month, with the data slightly failing to meat expectations of 1.15 million. Among permits the single-family ones provided concerns, as they showed the largest monthly slowdown during the past 15 months. The permits for houses dropped 2% down to 726,000 units, while the apartment permits were at 381,000 units. This weaker data is unlikely to have a serious effect on the GDP second estimate, as it is forecasted to show signs of improvement, being driven by higher demand in household.
Upcoming fundamentals: Kashkari Speaks, BoJ and RBA release minutes
At the start of a new week, financial markets are quiet, as the only events affecting the fundamental data on Monday are Fed's Kashkari's Speech and two central bank minutes. Firstly, at 16:15 GMT the Minneapolis Federal Reserve Bank President and the non-voting member of the Federal Open Market Committee Neel Kashkari will give a speech on shortfalls of current policies towards banks. Secondly, the Bank of Japan is set to release its monetary policy meeting minutes at 23:50 GMT, and the Reserve Bank of Australia will release its minutes at 01:30 GMT.
Gold struggles around 1,280 level on Monday
Daily chart: After suffering losses on Thursday, the yellow metal regained losses and it even gained additional value on Friday, as gold reached the 1,297.48 level at the end of day's trading session. However, on Monday morning, the bullion is losing value against the US Dollar, as the metal is at the 1,281.50 mark, and it is struggling on its downward movement with the support provided by the first monthly resistance at 1,278.62. In the meantime, aggregate daily technical indicators predict a surge for gold, and in such case it would have to break the resistance provided by the weekly PP at 1,295.15.Daily chart
Hourly chart: The hourly chart shows that gold's drop happened with a lower opening on Monday, as Friday's session was finished at 1,297.52, and Monday session was opened at 1,289.92. In addition, in the first hour of Monday's session the bullion touched the lower Bollinger band at 1,281.00. Since then, the yellow metal has been losing value and slowly moving to the first monthly resistance at 1,278.62. However, daily aggregate technical indicators predict a surge for gold today, and in such case the metal will next face the 100-hour SMA at 1,288.35.
Hourly chart
SWFX traders decrease bearish sentiment on Monday
Meanwhile, OANDA Bank clients are bullish with respect to the bullion, precisely in 54.20%. However, SAXO bank clients have become almost neutral on the yellow metal, as 50.13% of positions are short.