Gold reveals an ascending channel

Source: Dukascopy Bank SA
  • 56% of all SWFX open positions are long
  • Gold opened Wednesday's session at 1,262.11
  • The 1,250 psychological level provided support for a week
  • Economic events to watch over the next 24 hours: US Building Permits; US Housing Starts; FOMC Member Dudley Speaks
The yellow metal fluctuated around the first weekly resistance level at 1,261.62 during the morning on Wednesday. Previously, the metal surged to the 200-day SMA at 1,265.36 and retreated after that to end the day's trading session just below the previously mentioned weekly resistance level. However, on Wednesday morning, the rate began the day by touching the SMA once more, and continuing to slowly bounce around with a general upward direction.

US consumer prices rose most since April last month, driven by a surge in gasoline and rental prices. On Tuesday, the US Department of Labor said its Consumer Price Index advanced 0.3% in September, following the preceding month's gain of 0.2% and meeting analysts' expectations. On an annual basis, the CPI climbed 1.5%, posting the biggest year-over-year rise since October 2014 and surpassing August's 1.1% increase. Meanwhile, the so-called core CPI, which excludes food and energy prices, rose 0.1% month-over-month and 2.2% year-over-year in the same month after climbing 0.3% on a monthly basis and 2.3% on a yearly basis in August. Notwithstanding, today's disappointing core CPI data is unlikely to change the prospect of a Fed rate hike in December. The September increase was mainly driven by higher gasoline prices that surged 5.8% after falling 0.9% in August. The price of food remained unchanged for the fifth consecutive month in September. As to the core CPI, owners' equivalent rent of primary residence advanced 0.4%, following the 0.3% rise in August, while medical care costs grew 0.2%, compared to the preceding month's 1.0% hike. Hospital services prices held steady in September, whereas prescription drug costs climbed 0.8%.

Industrial production in the United States rose less than expected last month, suggesting the economy grew at a moderate annual pace in the Q3. The Federal Reserve revealed on Monday the country's industrial output advanced 0.1% in September, compared to the preceding month's downwardly revised fall of 0.5%, while market analysts anticipated a rebound of 0.3% in the reported period. On an annual basis, industrial production increased 1.8% in the Q3, marking the first quarterly rise since the Q3 of 2015. Manufacturing output as well as mining output rose 0.2% and 0.4% in September, respectively, while utilities output fell 1.0% in the same month. The industrial sector was badly hurt by the strengthening US Dollar and surging price of oil between June 2014 and December 2015. Also, it was hampered by businesses' efforts to reduce an inventory overhang. However, the recent stabilization of the US Dollar and oil prices suggest a significant rebound in industrial production. In addition, capacity utilization declined to 75.4% during the ninth month of the year, down from last month's 75.5% reading, while economists anticipated a slight increase to 75.6% during the reported period.

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Upcoming fundamentals: US Building Permits and Dudley's speech

US construction data will affect the yellow metal's movements during today's trading session. US Building Permits and Housing Starts are set to be published at 12:30 GMT. One more notable event is the speech set to occur at 23:45 GMT, as FOMC Member Dudley is set to speak, and he might give insight into the policy of the Fed.



Gold struggles with resistance at 1,261.62

Daily chart: The yellow metal battled resistance on Wednesday morning, as it faced the first weekly resistance level at 1,261.62. Previously, the bullion surged from the weekly PP at 1,253.84 to the 200-day SMA at 1,265.36. However, afterwards the commodity price moved lower to end the day's trading session just below the before mentioned first weekly resistance level. Although, on early Wednesday morning, the metal attempted to break through the SMA once more, it failed in breaking past it. Nevertheless, it is most likely that gold will surge in the medium term, as the SMA moved northwards.

Daily chart
© Dukascopy Bank SA

Hourly chart: The hourly chart for the yellow metal reveals that the weekly R1 is set to be broken. All of the hourly SMAs are moving upward together with the metal, and the 20-hour SMA is prepping the commodity up every time it begins to fall. Moreover, a clear channel up pattern, beginning on October 14, can be seen dictating the commodity price.

Hourly chart
© Dukascopy Bank SA


Traders remain bullish

Traders remain bullish on the metal, as 56% of open positions are long. In the meantime, 63% of pending commands are set up to buy the bullion

Meanwhile, OANDA Bank clients remain majorly bullish with respect to the bullion, as on Tuesday morning 77.74% of all positions were long. In the meantime, SAXO bank clients show a similar trend with 60.88% of all positions being held by bulls.

Spreads (avg,pip) / Trading volume / Volatility


Market participants foresee the price of gold at 1,300 in January

Traders who were asked regarding their longer-term views on gold between September 19 and October 19 expect, on average, to see the metal below 1,300 in January. Generally, 47% of participants believe the price will be above 1,300 in ninety days. Alongside, 39% of those surveyed reckon the price will trade in the range between 1,150 and 1,300 over the next three months.

© Dukascopy Bank SA

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