- Dollar-long positions were slashed from 53% to 50% as ADP employment report approaches
- Positive data may send gold below trend-line at 1,117 on Wednesday
- Daily technical indicators are mixed
- Economic events to watch in the next 24 hours: ECB President Draghi Speaks; Euro zone Services and Composite PMI (Oct); US ADP Employment Change (Oct), Trade Balance (Sep), Services PMI (Oct) and ISM Non-Manufacturing PMI (Oct); Fed Chair Yellen Speaks; FOMC Members Dudley, Brainard and Fischer Speak; UK Services PMI (Oct); Canadian Trade Balance (Sep); RBA Governor Stevens Speaks
Gold stabilized on Wednesday following a five-day losing streak, but continued to trade near its lowest level in four weeks amid investor outflow and expectations for a US rate hike this year. After somewhat worse than expected economic data earlier in the week, market participants are awaiting US nonfarm payrolls due on Friday, while the ADP employment data and ISM report on services sector due later in the day could also move markets. SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell 0.43% to 686.30 tonnes on Tuesday - the lowest in five weeks.
New orders for US factory goods declined for a second consecutive month in September as the manufacturing sector continues to suffer from a strong US Dollar and dramatic spending cuts by energy companies. According to the Commerce Department, factory orders declined 1% in the reported month following a 2.1% decrease in August. A category that serves as a proxy for business investment spending slipped 0.1%. The September result was driven by a steep 36% fall in the volatile category of commercial aircraft. Yet, the weakness appeared to be widespread across other categories including primary metals, machinery and computers. Us manufacturers have been suffering this year as a strong Greenback makes American products less competitive overseas. The Dollar has gained 16.8% versus the currencies of the US main trading partners since June 2014, which has undermined export growth and weighed on the profits of multinationals.
Meanwhile, Australian retail sales continued to rise at a weak pace in September, while sales volumes declined in the third quarter, suggesting consumers remain wary amid Australia's economic transition. Retailers reported a 0.4% growth in sales in the measured month, in line with economists' expectations. However, on an annualised basis sales growth declined marginally to 3.6%, the Australian Bureau of Statistics said. Sales volumes climbed 0.6% in the September quarter, coming in weaker than the forecast of 0.7%, and falling from 0.8% in the June quarter. The RBA has tried to underpin demand by cutting interest rates twice already this year, and signalled that the central bank had more ammunition.
Upcoming fundamentals: Speeches of central bank officials and US ADP employment
While the official payrolls' report on Friday is assumed to register a rebound in the pace of job creation in October, the ADP data on Wednesday will most probably show a somewhat different picture. Numbers should be published at 12:15 GMT and economists foresee a gain of 183,000 in October, down from 200,000 in the preceding month. In the meantime, many officials from the Federal Reserve will speak later on Wednesday. The Chair Janet Yellen will testify before the US House of Representatives' Financial Services Committee at 14:00 GMT. Other speakers include FOMC members Brainard, Dudley and Fischer. The Fed Governor Lael Brainard will participate in the ECB panel discussion in Frankfurt, Germany. President of the New York Fed William Dudley will talk about US economy in New York, while audience questions are expected. Another Fed Governor Stanley Fischer will speak at the National Economists Club in Washington DC.
Gold slumped to reach 4-month trend-line
Bears spent the Tuesday's trading session by actively selling the yellow metal, just before the bunch of US statistics is published later on Wednesday. A perfect trade pushed XAU/USD down to the four-month major trend-line, where the daily closing level was touched at 1,117. Optimistic US fundamentals may result in breaching of this crucial support, which will then expose the Oct low at 1,104 and Sep low at 1,098. In case of a rebound, bulls should target the yesterday's open at 1,133 and keep in mind 100/55-day SMAs at 1,137/39.Daily chart
Gold outlook in the one-hour chart remains strongly bearish at the moment. The metal will be fundamentally-driven today, meaning a trend-line at 1,117 is highly likely to be erased in case of unexpected US ADP employment or PMI numbers. In addition from the technical point of view, the 200-hour SMA at 1,153 is going to continue putting downward pressure on the metal in the foreseeable future.
Hourly chart
SWFX sentiment is neutral on Wednesday
OANDA's long traders are gaining even higher market share every single day, while the total number of their open positions rose from 65.8% to 70.8% in 24 hours through Wednesday morning. On top of that, 72% of SAXO Bank clients preserve their positive stance with respect to gold, which translates into a 13% growth of long positions in just one working day.