Gold falls to 1,330 on Tuesday

Source: Dukascopy Bank SA
  • 59% of all SWFX open positions are bearish
  • Prices fluctuating around 1,340 level on Wednesday morning
  • Gold fell on the clarity brought on by the new UK's prime minister
  • Economic events to watch over the next 24 hours: US Import Price Index (Jun); Fed's Kaplan Speaks; US Beige Book and Monthly Budget Statement (June); Fed's Harker Speaks
The Bullion paused its surge on Monday, as, amidst uncertainty, the new PM of UK surfaced. Previously EU lawmakers met in the EU Economic Summit called together to deal with the UK issue and assumed a strict position on the matter However, it did not stop the yellow metal's surge. Because of that, even gold initially dropped slightly for two session since the Brexit, the bullion steadily surged for the past two weeks. That is due to the fact that uncertainty still prevailed in the past weeks, as the political intrigues in the UK for the prime ministers seat were unfolding. However, the new PM will take her seat on Thursday, as David Cameron resigns.

According to the Mark Carney, criticism towards the Bank of England in the run-up to the EU referendum had been "extraordinary in all senses of the word". For the first time in more than seven years, economists are finally expecting some action from the Bank of England towards the UK interest rates during its first meeting after the Brexit referendum on Thursday. It is expected, that in order to calm financial markets and spur confidence after the Britons voted to leave the European Union, the central bank is widely seen to reduce its key interest rate to 0.25% from a current record low of 0.5%, where it has stood since March 2009. Currently, the BOE, is trying to find a balance of addressing the potential economic impact of a Brexit, without seen as siding with either political position. Philip Shaw, chief economist at Investec adds "Carney alluded to a range of available policy options, some of which were not used previously. We are at pains to identify exactly what the Governor might have in mind here. Dropping cash from helicopters (or a practical equivalent), has been ruled out by several central banks and we do not see this as a realistic possibility". Meanwhile, the BOE rate decision and minutes are going to be announced on Thursday

The U.S. labour market continued to slow in June but at a more moderate pace as the economy moved closer to full employment, according to an index prepared by the Federal Reserve. The US labour market conditions index registered a 1.9 decline for June from after a revised drop of 3.6 the previous month. This was the sixth successive decline and also a slightly larger than expected decline for the month, maintaining the generally disappointing trend seen for 2016 as a whole. The data could suggest an imminent turning point, but further evidence will be needed to convince markets of a sustained improvement despite the bumper payrolls release last Friday. The LMCI is a broad composite index of 19 labour-market indicators and it watched closely by the Federal Reserve with Chair Janet Yellen instrumental in setting up the index. The Fed introduced the index in 2014 as a way to measure the labour market's momentum. Moreover, Fed officials have touted the LMCI as a more comprehensive view of the labour market than the one provided by individual data releases from the Department of Labour and other agencies.

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Upcoming fundamentals: US Imports, monthly budget and crude oil inventories

On Wednesday news will come from the US, as Import Price Index for June will be published at 12:30 GMT first. The Fed's Kaplan will give a speech at 13:00 GMT at the World Affairs Council of Houston. At 14:30 GMT DOE Crude-Oil Inventories for July 8 will affect all commodity prices, and gold is no exclusion to this rule. Later in the evening, at 18:00 GMT the US Beige Book on which the FOMC base their decisions will become publicly available, and at the same time US Monthly Budget for June will be released. Last but not least, the Fed's Harker will give speech at 22:00 GMT.



Gold suffers losses on Tuesday

Daily chart: The yellow metal marked its second consecutive session of losses on Tuesday, as it fell from 1,355.19 at the start of day's trading to 1,331.66 at the end of Tuesday's trading. In addition, this fall went right through the support provided by the weekly S1 at 1,342.44. However, on Wednesday morning, the bullion has surged a little bit on Wednesday morning, as the metal started the session at 1,332.70, and it has slowly moved towards 1,337.14 mark by 5:00 GMT. In addition, daily aggregate technical indicators forecast a surge for the bullion for today.

Daily chart
© Dukascopy Bank SA

Hourly chart: The hourly chart shows that gold was trading steadily around 1,355 mark on Tuesday morning until 8:00 GMT. Afterwards, the yellow metal fell for nine hours to 1,332, as it passed the 200-hour SMA at 1,351.07 and the weekly S1 at 1,342.44. The metal traded steadily until 2:00 GMT on Wednesday, when it suddenly surged to 1,338, the level at which it has stayed by 5:45 GMT.

Hourly chart
© Dukascopy Bank SA


SWFX traders bearish on Tuesday

Traders have decreased their bearish sentiment on Wednesday, as 59% of SWFX traders are short on the yellow metal, compared to 65% on Tuesday. In the meantime, pending orders in the 100-pip range are 71% long.

Meanwhile, OANDA Bank clients are bullish with respect to the bullion, precisely in 58.05%. In the meantime, SAXO bank clients are more bullish on the yellow metal, as 59.68% of positions are long.

Spreads (avg,pip) / Trading volume / Volatility


Market participants foresee the price of gold at 1,375 by the end of September

Traders who were asked regarding their longer-term views on gold between June 13 and July 13 expect, on average, to see the metal around 1,375 by the end of September. Generally, 44% of participants believe the price will be generally above 1,400 in ninety days. Alongside, 47% of those surveyed reckon the price will trade in the range between 1,1200 and 1,400 over the next three months

© Dukascopy Bank SA

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