Gold gains ground as FOMC decision approaches

Note: This section contains information in English only.
Source: Dukascopy Bank SA
  • Bullish SWFX market share is flat at 52%
  • 200-day SMA at 1,172 is the key target for bulls, followed by weekly R1 at 1,177
  • Daily technical indicators are giving slightly positive signals
  • Economic events to watch in the next 24 hours: German GfK Consumer Confidence (Nov); US Goods Trade balance (Sep) and Crude Oil Inventories (Oct 23); FOMC Interest Rate Decision; Swedish Riksbank Interest Rate Decision; RBNZ Interest Rate Decision

© Dukascopy Bank SA
Investors estimate another surge in US oil stockpiles for the week ended October 23. This projection was pushing oil prices lower yesterday when they declined by more than 1.5%. Corn prices fell by 1.2% and helped the benchmark S&P GSCI Index to register an almost one percentage point slump during the observed trading session. Meanwhile, weather experts suggest the upcoming winter will be unusually warm in the United States, which usually decreases demand for natural gas. Even though prices for US consumers reached their lowest level since 2012, the market-traded price of natural gas managed to recover by 1.5% on Tuesday. Precious metals resumed growing amid the ultra-low expectation the Fed will raise interest rates today. Gold and silver were up by 0.3% and 0.2%, accordingly.

Gold continued to rise slightly on Wednesday, but investors remained cautious ahead of the Fed policy statement later in the session, waiting for hints on the timing of a US rate hike. The US central bank is not expected to raise interest rates today, but market participants will be watching closely the statement to understand whether the Fed would hike rates at its December meeting.

Meanwhile, US orders for big-tickets goods such as heavy machinery or airplanes dropped in September for the second consecutive month. According to the Commerce Department, orders for long-lasting products declined 1.2% last month following a revised 3.0% decrease in August. At the same time non-defence capital goods orders excluding aircraft, a proxy for business investment, slid 0.3% after a 1.6% drop in August. American manufacturers have been struggling due to soaring US Dollar, which makes US goods more expensive overseas. Moreover, cheap oil has also sapped demand for heavy-duty goods used by domestic drillers and energy firms. Durable goods orders have been down in four of the past six months, pointing to problems facing manufacturers as they struggle with economic weakness in top export markets like China.


Among other countries' fundamentals, Australian consumer prices climbed at a weaker pace than expected in the third quarter, opening door to interest rate cut and sending the Aussie Dollar steeply lower. Australia's consumer price index edged up 0.5%, the Australian Bureau of Statistics reported, down from 0.7% in the June quarter. Measured on an annual basis, costs of living in Australia held steady at 1.5%, below market's consensus of 1.7%. At the same time, the nation's underlying inflation rose by just 0.3% in the three months through September, the smallest gain since 2011 and missing market forecasts of 0.5%. The annual core inflation rate slowed to around 2.15%, compared with 2.3% in the second quarter. The Australia Dollar dropped 0.77% versus the Greenback to $0.7133 after the data release from $0.7188.

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Upcoming fundamentals: Day of central banks' decisions



Three big monetary policy regulators are going to announce their interest rate decisions on Wednesday. The main focus is on the Federal Reserve. According to the implied probability for the Federal Funds Rate, there is a 4% chance the FOMC will hike interest rates today, meaning market participants do not expect any move to take place. At the same time, traders are going to track the number of dissenters who will vote in favour of raising the Fed Funds target range. Last time only the Richmond Fed President Jeffrey Lacker was on the losing side of the 9-1 vote. Apart from the Fed, the Reserve Bank of New Zealand will announce its policy decision at 20:00 GMT today, but no changes are expected from the current level of 2.75%. Moreover, the Swedish Riksbank will have to decide, whether to cut the repo rate further from the current level of -0.35%.


Gold gains ground as FOMC decision approaches

The yellow metal advanced for the first time in four days on Tuesday, but gains did not exceed even the closest resistance represented by the weekly pivot point at 1,167. However, the rally seems to be continuing on Wednesday, just before the FOMC makes an interest rate decision later in the day. In case both Aug high and 200-day SMA are penetrated, the focus will switch to the next supply at 1,177 (weekly R1). Markets are closely watching the Fed event, and language the policymakers are using is the most important for them. Daily technicals are also bullish as they support the weaker Dollar at the moment.

Daily chart
© Dukascopy Bank SA

Positive outlook for the bullion is supported by the one-hour chart, where the price is currently testing the 200-hour SMA at 1,170. This level is strengthened by the Aug high, meaning a success here may imply considerable future gains for gold.

Hourly chart
© Dukascopy Bank SA

SWFX sentiment unchanged at 52%

SWFX market sentiment with respect to the precious metal remained broadly unchanged for the past four weeks. Moreover, the share of bulls is completely flat at 52% already for six working days, meaning that their advantage still remains very negligible right now.

Meanwhile, OANDA's positive market sentiment advanced further to reach the 55.59% mark by Wednesday morning. In addition, 57% of SAXO Bank clients continue to assume that the precious metal is going to gain value, no change from yesterday.















Spreads (avg,pip) / Trading volume / Volatility


Average forecast for the end of January 2016 is 1,200

Meanwhile, traders, who were asked regarding their longer-term views on gold between Sep 28 and Oct 28 expect, on average, to see the metal around 1,200 by the end of January. Though, 50% of participants believe the price will generally above this mark in ninety days. Alongside, 33% of those surveyed reckon the price will trade in the range between 1,200 and 1,050 by the end of next year's first calendar month.

© Dukascopy Bank SA

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