Gold becomes flat in Fed expectations

Source: Dukascopy Bank SA
  • 53% of all SWFX open positions are short
  • Markets are expecting Friday's information from the Fed
  • Prices fluctuate around the 1,340 level since August 4
  • Economic events to watch over the next 24 hours: US Housing Price Index (June); US Existing Home Sales (July);
The yellow metal did not disappoint and did exactly as expected, as the metal surged to the pivot point cluster around 1,345 level and bounced off it on Tuesday. On Wednesday morning the bullion continues to fluctuate around the level of 1,336, to which it fell the previous session. However, as the 20-day SMA provides pressure from above in a downward movement, it is most likely that the commodity will move southwards to at least touch the weekly S1 at 1,331.76. Although, it is almost impossible that the metal will move below the first weekly support level.

New home sales in the United States rose more than expected in July, official data showed on Tuesday. According to the Department of Commerce, new home sales increased 12.4% to a seasonally adjusted annual rate of 654,000 in the seventh month of the year, reaching the highest level since October 2007. Meanwhile, the preceding month's reading was revised down to 582,000 from the originally reported 592,000 units. Market analysts penciled in a slight deceleration to 575,000 units in the reported month. July's surge probably exaggerates the housing market strength, as new single-family home sales are extremely volatile month-to-month; still, they were 31.3% higher than a year ago. The data also showed that new single family home sales jumped 40.0% in the American Northeast, as well as grew 1.2% in the Midwest region. Sales in the South rose 18.1% to their best level since July 2007, whereas the West region remained flat last month. Furthermore, inventories of new homes for sale dropped 2.9% to 233,000 units in July, the lowest level since November 2015. The median price of a new single-family home fell 0.5% year-over-year to $294,600. The US Dollar rose slightly after the release, trading at 1.1326 against the Euro, 100.11 against the Japanese Yen and 1.3186 against the British Pound.

If Canadian consumer prices grew less than expected in July, fresh data revealed on Friday. According to Statistics Canada, the central bank's core Consumer Price Index (CPI) came in at 0.0% on a monthly basis and at 2.1% on an annual basis in July, in line with analysts' expectations and the preceding month's readings. Overall, Canada's consumer prices dropped 0.2% month-over-month in the seventh month of the year, compared to the 0.2% hike seen in June, while economic desks expected the indictor to come in at 0.0% in the reported month. Year-over-year, inflation rose 1.3% in July, whereas markets anticipated the inflation rate to remain unchanged at 1.5%. The fall in the overall CPI was mainly driven by lower energy prices, as gasoline prices declined 14% in July from a year earlier, following the previous month's drop of 8.5%. Other data released by Statistics Canada showed a surprise fall in Canada's retail sales. The total value of sales at the retail level in Canada, excluding automobiles dropped 0.8% on a monthly basis in June, compared to May's downwardly revised 0.8% gain. Overall, retail sales decreased 0.1% in the first month of summer, following the preceding month's downwardly revised reading of 0.0%. The volume of sales declined in 7 of 11 categories, accounting for 54% of the industry. Meanwhile, analysts expected Canada's core retail sales and overall retail sales to grow 0.4% and 0.7% in June, respectively.

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Upcoming fundamentals: US pre-owned housing data

It is highly unlikely, however the yellow metal might change the level, at which it fluctuates before the Fed Friday. A change of the fluctuation level might happen, if some of the data set to be released today would drastically differ from the forecasts. The expected data will be the US Housing Price Index monthly change for June, which will be released at 13:00 GMT, and at 14:00 GMT the US Existing Home Sales data for July will be out.



Gold continues to fall on Wednesday

Daily chart: The yellow metal is in its fourth consecutive session of losses, as it continues to bounce around the 1,340 level. The metal is forced to move downwards due to the fact that the 20-day SMA at 1,339.79 is pressuring it to move lower. However, it can only continue up to the moment, when the bullion reaches the support level below at 1,331.76, which is represented by the weekly S1. In the previous two sessions, the metal bounced between the newly formed weekly S1 and a compound resistance made up of the weekly and monthly pivot points near the 1,345 level.

Daily chart
© Dukascopy Bank SA

Hourly chart: Gold's hourly chart shows another session of almost flat trading. However, this time the yellow metal bounced slightly upward, as it stopped trading flat at 11:00 GMT and jumped to 1,344.61 level between 12:00 and 13:00 GMT on Tuesday. Although, the metal was back to its previous position by 15:00 GMT. Since then, the bullion continued to trade almost flat, as it fluctuates between the SMAs and closely located Bollinger bands. The Bollinger bands are located only eight US Dollars one from another, which indicates at almost no volatility.

Hourly chart
© Dukascopy Bank SA


SWFX traders are bearish on Wednesday

Traders continue to be bearish on the yellow metal, as 53% of open positions are short on Wednesday. In the meantime, pending commands are 57% long.

Meanwhile, OANDA Bank clients are bullish with respect to the bullion, precisely in 63.71%. In the meantime, SAXO bank clients are less bullish on the yellow metal, as 59.09% of positions are long.

Spreads (avg,pip) / Trading volume / Volatility


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

Traders who were asked regarding their longer-term views on gold between July 24 and August 24 expect, on average, to see the metal around 1,375 by the end of October. Generally, 51% (+1%) of participants believe the price will be above 1,400 in ninety days. Alongside, 30% (-1%) of those surveyed reckon the price will trade in the range between 1,200 and 1,400 over the next three months

© Dukascopy Bank SA

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