- Share of long trades is stable at 61%
- Long-term bulls to focus on 2014 low at 1,131
- Key demand can still be found around 1,080
- Economic events to watch in the next 24 hours: Italian CPI (Jul), German ZEW Economic Sentiment (Aug), US Unit Labour Costs (Q2) and Non-Farm Productivity (Q2), Japanese Industrial Production (Jul) and Tertiary Industry Activity (Jun), Chinese Retail Sales (Jul) and Industrial Production (Jul)
However, gold dropped from its three-week high above $1,100 an ounce on Tuesday as the US Dollar strengthened after China devalued its Yuan to support the economy. The Chinese government allowed the nation's currency to slide to its three-year low after a slew of soft economic data. The PBoC called the move as a "one-off depreciation" of nearly 2%. The yellow metal gained nearly 1% on Monday, its biggest rise since June 18, as the Dollar dropped from its highest level since April versus a basket of currencies amid uncertainty of US interest rate hike in September after last week's weaker-than-expected non-farm payrolls data.
Dennis Lockhart, Federal Reserve Bank of Atlanta President said the US central bank is close to hiking the interest rates, as the world's number one economy is "approaching an acceptable normal." However, Lockhart highlighted that the pace of subsequent rate increases should be gradual. The economic growth is expected to pick up in the second half of the year, while the labour market will continue to tighten that will likely to push up wages. The 12-month inflation remains very week, Lockhart added, but there were some signs that short-term inflation has been firming.
Meanwhile, business confidence in Australia declined in July after two months of upbeat mood, as mining and construction companies became more concerned about China's slowdown. National Australia Bank's monthly survey of over 400 firms revealed the index of business confidence dropped 4 points to +4 in July, while the measure of business conditions also fell 4 points to +6. Confidence is now below its long-term average, although it remains in positive territory. A figure above zero suggests an improvement in conditions, while a reading below zero signals deterioration.
Upcoming fundamentals: Chinese data in focus
Tomorrow morning Chinese statistical authorities will release industrial production and retail sales numbers for July. Both gauges are forecasted to show little changes from a growth pace showed in June, namely at 6.7% and 10.6% on an annual basis, respectively.
XAU/USD touches 1,109 for first time since Jul 21
Fed's Stanley Fisher rate comments sent the XAU/USD cross in the direction of 1,109 for the first time in three weeks. However, gold spent only a short period of time above the long-term downtrend and it is now undergoing a correction phase. Medium and long-term views on the bullion have no changes and are fairly bearish, despite technical studies being mixed on all time frames. In the near term, however, the precious metal may consolidate above 1,102, but monthly PP/Bollinger band should withstand any additional pressure from the bullish side.Daily chart
In the one-hour chart the yellow metal violated the downtrend and strengthened above 200-hour SMA. These developments are improving our interim outlook towards gold. However, it is required to concentrate the price in the range between 1,100 and 1,114 in the next few days, in order to demonstrate strong intentions to recover in the foreseeable future.
Hourly chart
SWFX sentiment flat at 61%
In the meantime, OANDA share of bulls stays at 62.87% of all current positions, while SAXO Bank traders are also firmly optimistic towards gold at the moment, as there are 65% of bullish trades opened by Tuesday morning.