- Opened positions on gold are strongly bullish (71% long / 29% short)
- The immediate resistance for the yellow metal is currently located at 1,107
- At the same time, the nearby support for the bullion is placed at 1,088
- Important economic events to follow in the next 24 hours: Italy Retail Sales (May), US Existing Home Sales (Jun), Bank of England Meeting Minutes and Inflation Report Hearings, RBNZ Official Cash Rate Decision, Japan Trade Balance (May), Greece Parliament Bailout Vote
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Gold remained near the lowest level in five years on Wednesday, being under sustained pressure days after bullion's sharpest decline in almost two years, with more falls expected ahead amid a gloomy demand outlook. Investors see less reason to hold gold as a safe haven after the global financial crisis, with the US Dollar appreciating ahead of the first rate hike by the Fed in almost a decade. In addition to that, India remains slow in picking up the slack in China's demand for gold as potential buyers wait for further price drops.
Meanwhile, Swiss trade surplus rose unexpectedly in June, the Federal Statistics Office reported. Trade balance of the Alpine country surged to a seasonally adjusted 3.578 billion francs, up from 3.409 billion francs in the previous month. Economists, however, had expected a 2.80 billion francs surplus in the reported month. Swiss real exports declined 0.9% in June on a monthly basis, following the 1.1% increase in May. At the same time, real imports surged 2.2% on month in June.
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BoE minutes, RBNZ rate decision in focus on Wednesday
Today the Reserve Bank of New Zealand is going to make its key interest rate decision, which will be announced at 21:00 PM GMT. The regulator is expected to cut the main rate by 25 basis points, down from 3.25% to 3%, even though some analysts suggest the RBNZ will make a more decisive move by slashing the benchmark rate by 50 basis points. Meanwhile, the Bank of England's minutes of the most recent MPC meeting are due today at 8:30 AM GMT. While this time they are not estimated to show any changes in the distribution of votes among MPC members, economists suggest that the next time at least one policy maker will vote in favour of raising interest rates in the country.Read More: Fundamental Analysis
XAU/USD develops inside bearish wedge pattern on daily chart
Since the second quarter of 2013, the bullion has been developing inside the falling wedge pattern, meaning that trading range is decreasing as time goes on. Two pattern's boundaries are represented by the upper trend-line around 1,270 and pattern's support at 1,115. Among recent developments, in March 2015 the yellow metal resumed gaining value, even without touching the lower trend-line, but the growth stalled beneath the 2009 high at 1,230. In the foreseeable future the rally is likely to be limited and the bullion should be driven by the 200-day SMA around 1,200, which has a slight bearish bias. Some short-term gains in the direction of the long-term downtrend (1,270) are not completely off the table, but bears are eventually going to overtake a lead and drive the metal back to the south. The overall negative tendency for gold seems to be the case in the long run, while at the end of this year the precious metal should to consolidate around 1,150, in case the present trend persists.Daily chart
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Gold intended to rebound on Tuesday, in order to erase at least a small part of losses that occurred in the beginning of this week. However, the nearest cluster of resistances remained intact and bulls were forced to capitulate around the 1,110 mark, where monthly S3 and weekly S2 merge with the long-term downtrend line. Weak performance of longs is underlying continuous strength of bearish market participants. They are aiming at the weekly S3 in the short-term, which is placed around 1,088. On the other hand, daily technical studies are still sending mixed signals to the market.
Hourly chart
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SWFX sentiment strongly bullish towards gold
OANDA's bulls are in the safe majority with 67.76% of all current positions, as they recovered around two percentage points since yesterday morning. This sentiment is currently the third most positive among all major crosses. In addition, Saxo Bank market participants are also optimistic towards the precious metal at the moment, as there are 72% of bullish trades registered in the morning on July 22.
Spreads (avg,pip) / Trading volume / Volatility
Traders, who were asked regarding their longer-term views on XAU/USD between Jun 22 and Jul 22 expect, on average, to see Gold trading just below 1,150 by the end of October. At the same time, 45% of them believe the bullion will be strongly above this mark in three months, while 38% of traders surveyed forecast the bullion to trade in the range between 1,000 and 1,150.
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