- Portion of SWFX bulls is little changed at 72%
- Closest resistance lies at 1,100 (monthly S1), bears keep their focus on July low
- Daily technical indicators provide a strong aggregate signal to sell the yellow metal
- Economic events to watch in the next 24 hours: Euro zone Final CPI (Oct); ECB President Draghi Speaks; German Bundesbank Monthly Report; US Empire State Manufacturing Index (Nov); Canadian Manufacturing Sales (Sep); RBA Meeting Minutes; RBNZ Inflation Expectations (Q4)
Meanwhile, gold surged 1% on Monday amid safe-have bids following Friday's multiple deadly attacks in Paris. Before Monday's gains, the precious metal had declined for 12 sessions out of 13 due to increasing bets that the Fed would raise interest rates next month. However, due to global uncertainty, bullion is likely to trade higher this week. Yet, the yellow metal faces selling pressure in the medium to long term due to the looming rate hikes in the US.
US retail sales rose less than expected in October due to a surprise decrease in automobile purchases, signalling Americans remained cautious about opening their wallets despite robust job growth and accelerating wages. Consumer spending at retail stores and restaurants climbed just 0.1% from the preceding month to a seasonally adjusted $447.3 billion in October, according to the Commerce Department. Economists, however, had predicted a 0.3% increase after a zero growth in September. The October increase was largely driven by sales at non-store retailers, including online shopping, which increased 1.4% last month. Yet, that was barely enough to compensate for a 0.5% drop in auto sales and motor vehicle parts, along with sluggish sales at gasoline stations. At the same time, core retail sales edged up 0.1% in the reported month.
Consumer spending in New Zealand rebounded strongly in the third quarter, powered by robust sales of cars and auto parts. Retail sales volumes rose 1.6% on a quarterly basis in the July-September period, the Statistics New Zealand reported, beating market consensus for a 1.4% gain and compared with a lacklustre 0.1% rise in the June quarter. The value of retail sales rose 1.4% in the measured period, following a 0.3% increase in the second quarter. Motor vehicle and parts retailing reported the largest volume gain in the third quarter, advancing 5.0%. Meanwhile, core retails sales, which strip out the fuel and auto industries, climbed at a pace of 1.0% last quarter. Out of 15 retail industries monitored, 10 reported higher sales volumes. Electrical and electronic goods was another sector that showed a robust performance in the three months ended September 30, rising 6.6%. The sharp increase in spending came after the Reserve Bank of New Zealand cut interest rates three times between June and September in an attempt to boost demand. The official cash rate was lowered from 3.5% to 2.75% over the three months, but was remained on hold since then as confidence strengthened again. The market is currently pricing in a 40% chance of another 25 basis point rate cut at the RBNZ's December 10 meeting.
Upcoming fundamentals: RBA minutes and RBNZ inflation estimates
Two weeks after the official Cash Rate was announced, the Reserve Bank of Australia will publish the minutes of its most recent meeting. In addition from the South-Pacific region, the Reserve Bank of New Zealand will release its fresh inflation forecasts for the last quarter of 2015. RBNZ survey is based on expectations among major business managers and asks for their projections over the next two years. Last time it stood at 1.9%, but current views might have deteriorated amid a recent downturn in energy prices.
Gold climbs past 1,095 on Japan's GDP data
Very few fundamentals, other than US ones, are usually able to drive the bullion substantially. However, today an exception was made for Japan, where economy entered a technical recession. Gold is recovering from last week's lows of 1,084 and is trading close to the 1,100 mark at the moment. This important psychological level and monthly S1 should manage to cap a rally in the short term. Our medium term expectation remains fairly bearish and main focus is on July low at 1,070. On the other hand, any gains above 1,100 will therefore intend to retake Nov 5 high at 1,111 next.Daily chart
Present trading level of the yellow metal coincides with the 200-hour SMA at 1,095. A spike above this line should considerably improve market sentiment as last time it was penetrated on Oct 28. Thus, from the one-hour chart's perspective, development of the next 24 hours is likely to determine a lot for the nearest future.
Hourly chart
SWFX bullish share hovers firmly above 70%
Meantime, OANDA's long traders pushed their portion above 80% by Monday morning (80.81%), the level we have not observed for a prolonged period of time. Additionally, almost 69% of SAXO Bank clients preserve their positive stance with respect to gold.