- Opened positions on gold are strongly bullish (70% long / 30% short)
- The immediate resistance for the yellow metal is currently located at 1,088
- At the same time, the nearby support for the bullion is placed at 1,073
- Important economic events to follow in the next 24 hours: France, Germany, Euro zone, US Manufacturing PMIs (Jul), US New Home Sales (Jun), UK BBA Mortgage Approvals (Jun)
Gold hovered around its lowest level since March 2010 on Friday and was set for the deepest weekly decline in nine months, pressured by prospects of further drops as the Fed steps closer to hiking interest rates. A decline of US initial jobless claims to the lowest level in 42 years reinforced expectations of a US interest rate increase later in the year. Initial claims for unemployment benefits dropped 26,000 to a seasonally adjusted 255,000 last week, the lowest level since November 1973, according to the Labor Department. Some economists expect the US central bank to raise rates by September, and possibly follow with another rate hike in December, suggesting more downside risk for non-interest bearing gold.
Meanwhile, Canada's retail sales surged to a record in May with gains across most categories led by new automobile dealerships. Nevertheless, the better-than-expected data might not sufficient to avoid a fifth negative monthly GDP figure. Canadian retail sales gained 1.0% to a record C$42.97 billion in the reported month, according to Statistics Canada. Economists had projected a modest 0.6% growth. Sales rose in nine of 11 major categories making up 92% of total receipts.
Upcoming fundamentals: UK BBA mortgage approvals expected to recover further in June
Number of new mortgage approvals for buying homes in Britain is forecasted to grow up to 43,500 in June of this year, or to the highest level since March 2014. The data will be published by the British Bankers Association at 8:30 AM GMT on Friday. Meanwhile, manufacturing and services industries in the US and Euro zone are likely to continue improving, with all PMI gauges expected to stay above the threshold of 50 points.XAU/USD long-term outlook
Since the second quarter of 2013, the bullion has developed inside the falling wedge pattern, meaning that trading range was decreasing as time went on. Two pattern's boundaries were represented by the upper trend-line around 1,270 and pattern's support at 1,110. However, the lower edge has been crossed in the middle of July 2015 and gold consolidated below this crucial level. Therefore, any rallies are quite unlikely in the medium-term and the precious metal will remain under pressure from both the trend-line at 1,110 and the 2014 low around 1,131. The probability of a continuous retreat has therefore increased considerably, which is fuelled by strength of the US Dollar. Long-term bears are currently concentrating on the five-year low at 1,044, which is immediately followed by the 2008 high at 1,031.Daily chart
XAU/USD short-term outlook
XAU/USD tested the weekly S3 at 1,088 for a third time this week on Thursday. This attempt ended with no success for bears and the cross closed slightly above this mark. Friday morning, however, seems to be more loyal towards short market participants, as gold is showing willingness to go lower. In case the precious metal closes around 1,080 today, the focus will then shift substantially to the downside and bears will start targeting the 2010 low at 1,044. On the other hand, several indicators (RSI and Stochastic) assume the metal is oversold and they foresee a recovery in the short and medium-term.Hourly chart
SWFX sentiment strongly bullish towards gold
In the meantime, OANDA's bulls are in the safe majority with 66.14% of all current positions, while Saxo Bank Group's traders are firmly optimistic towards gold at the moment, as there are 70% of bullish trades registered on July 24.
Spreads (avg,pip) / Trading volume / Volatility
Traders, who were asked regarding their longer-term views on XAU/USD between Jun 24 and Jul 24 expect, on average, to see Gold trading just below 1,150 by the end of October. At the same time, 46% of them believe the bullion will be strongly above this mark in three months, while 39% of traders surveyed forecast the bullion to trade in the range between 1,000 and 1,150.