Gold retreats on Wednesday

Source: Dukascopy Bank SA
  • 51% of all SWFX open positions are long
  • 57% of pending commands are to buy the metal
  • The bullion opened at 1,207.68
  • Upcoming Events: US HPI; US Crude Oil Inventories
The yellow metal broke out of the medium term ascending channel pattern on Wednesday morning. The commodity price is most likely set to fall as low as the weekly S1, which is located at 1,197.37. After doing additional analysis on the hourly chart, it was discovered that the bullion has formed a short term descending channel pattern. The descending channel is set to lead the metal to the previously mentioned support level, and it will be reached during the night from Wednesday to Thursday.

US homebuilding activity advanced more than expected in the last month of 2016, official figures revealed on Thursday. The Commerce Department reported housing starts rose 11.3% to a seasonally adjusted annual pace of 1.23 million in December, following the previous month's upwardly revised 1.10 million units and surpassing analysts' expectations for a 1.19 million-unit rate. The December increase suggested the housing market boosted economic growth in the Q4. Meanwhile, building permits came in at a seasonally adjusted annual pace of 1.21 million units in the same month, unchanged from November's upwardly revised reading, slightly missing economists' projections of a 1.22 million-unit rate.

Separately, the Philadelphia Federal Reserve said its Manufacturing Index jumped to 23.6 points in January, the highest level in more than two years, driven by a rise in new orders, which climbed to 26.0 from 14.90. Analysts anticipated a sharp fall to 16.2 points in January from the prior month's 21.5. Data also showed the Employment Index surged to 12.8 from 3.6, while the Business Outlook Index for the next six months hit its highest level since August 2014 of 56.6 points. Other data released on Thursday showed initial jobless claims fell 15,000 to 234,000 last week, the lowest level in more than 43 years.

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Upcoming fundamental events: Minor data releases

Wednesday's trading session is set to be a quiet one for fundamental data release volatility traders, as there are only few minor data releases scheduled for the day. Data that will affect the strength of the US Dollar is set to be released at various times during the day. First of all the US HPI will be out at 14:00 GMT. Secondly, the US Crude Oil Inventories will be out at 15:30 GMT.



Gold breaks pattern

Daily chart: The yellow metal dropped back to the 1,200 level, which had not been seen since Friday. Although, the drop itself might seem not that significant, there are other aspects that need to be taken into account. The bullion broke out of the medium term ascending channel patter, which had guided it since the middle of December. Due to that reason the channel is now obsolete. The commodity price is set to fall as low as 1,197.37, where the next notable support level is located at. At that level the weekly S1 is located at.
Daily chart
© Dukascopy Bank SA

Hourly chart: The hourly chart reveals additional and interesting information. First of all, in the aftermath of the bounce off from the 1,220 mark the bullion has formed a short term descending channel. The channel is likely to lead the metal to the weekly S1 by tomorrow morning. In addition, it can be seen that the previously dropped large scale descending channel's upper trend line continued to provide resistance, as soon as the metal dropped below it.

Hourly chart
© Dukascopy Bank SA


Traders approach neutral zone

Traders are almost neutral on the metal, as 51% of open positions are long. In the meantime, 57% of trader set up orders are to buy the bullion.

OANDA Gold traders have consistently continued to decrease their bullish outlook on the yellow metal, as open positions were already 70% bullish on Wednesday, compared to 80% a few weeks ago. Meanwhile, traders of SAXO bank also remain long, regarding the yellow metal, as 66.63% of open positions are bullish.

Spreads (avg,pip) / Trading volume / Volatility


Market participants foresee the price of Gold being around 1,250 in April

Traders who were asked regarding their longer-term views on gold between December 25 and January 25 expect, on average, to see the metal near 1,250 in early April. Generally, 47% of participants believe the price will be above 1,250 in ninety days. Alongside, 21% (-5%) of those surveyed reckon the currencies will trade in the range between 1,000 and 1,200 over the next three months.

© Dukascopy Bank SA

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