- Portion of SWFX bulls is little changed at 70% (72% before the weekend)
- Possible consolidation below 1,070 will eventually open doors towards 2010 low (1,044)
- Aggregate daily technical indicators expect gold to lose value in the next 24 hours
- Economic events to watch in the next 24 hours: French, German and Euro zone Manufacturing and Services PMI (Nov); US Manufacturing PMI (Nov) and Existing Home Sales (Oct); Fed Announcement; RBA Governor Stevens Speaks; Japanese Nikkei Manufacturing PMI (Nov)
Gold continued to decline on Monday, falling towards the lowest level in six years amid a strong US Dollar and Fed officials' comments on a possible US rate hike in December. There is a strong case for raising rates next month, particularly after the release of strong US jobs data earlier this month. Meanwhile, assets in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, dropped 0.18% to 660.75 tonnes on Friday, the lowest level since September 2008.
Canada's retail sales unexpectedly dropped in October, driven by a decline in sales of gasoline and autos, raising further fears over the Canadian economy in the second half of the year. Retail sales decreased the most since January, falling 0.5% to C$43.3 billion, Statistics Canada reported, whereas volumes climbed 0.1%. Meanwhile, core retail trade, which excludes automobile and parts sales, also slipped 0.5% after remaining flat in September. Sales at gas stations plunged 3.7% and hit the lowest level in eight months, mainly as a reflection of lower gasoline prices. A separate report showed the Bank of Canada's annual core CPI, which excludes eight volatile components, ran at the same pace as in the preceding month, posting 2.1%, which kept the index above the BoC's 2% target for the fifteenth month in a row. Analysts have been predicting a strong economic recovery in the second half of the year, following contractions during the first five months of 2015. In October the BoC revised its third quarter growth projections from 1.5% to 2.5%. Economists still believe that Canada's GDP growth could stay on track for 2.5% growth, but warn that the economy could end the quarter on a much softer note. The latest Canadian GDP figure for August showed a 0.1% rise.
William Dudley, the head of the New York Fed said that the US central bank should soon be ready to hike interest rates as central bankers grow increasingly confident that low inflation will rebound and the employment remains resilient. Most policy makers consider a meeting on December 15-16 as a possible time for the first rate lift-off in nearly a decade. However, Dudley highlighted that the Fed remained data-dependent and the central bank still had time to decide on whether or not it should raise rates next month.
Upcoming fundamentals: Tentative Fed announcement and housing data for October
In addition to announcements of the FOMC committee, the Fed is sometimes making other unscheduled statements. On Monday such a statement is estimated to take place and analysts project that the regulator may lift the discount rate, which stands at 75 basis points for the moment. This rate is used by commercial banks to borrow money from the Federal Reserve, which differs from the Federal Funds rate determined by the market in the range set by the Fed (currently at 0-0.25%). Alongside news from the US central bank, the existing homes sales data for October is due at 15:00 GMT. Economists see the total annualised sales at 5.39 million, down from 5.55 million in September. We should point out that during the past four out of five months this indicator posted better than initially anticipated numbers.
Gold determined to cross July low at 1,070
After moderate losses at the end of last week, gold opened substantially lower Monday morning. The bullion is setting eye on July low, which capped a decline twice during the previous working week. Bearish risks are also rising before today's announcement of the Fed. In case the 1,070 mark is crossed, the likelihood of monthly S2's (1,059) violation will increase. Trading volume remains high, meaning volatility is going to be uplifted. Meanwhile, in the aggregate, daily technical indicators are currently pointing downwards.Daily chart
Similar to the EUR/USD currency pair, the yellow metal was unable to consolidate above 200-hour SMA in the one-hour chart. We are therefore preserving bearish views on gold. One of the key supports coincides with monthly S2 around 1,058. It is represented by a trend-line, which connects the lows of Nov 12 and Nov 17.
Hourly chart
SWFX bullish share nears 70%
Meantime, OANDA clients also suggest the precious metal will commence a recovery in the foreseeable future, being that three out of four their traders have been bullish on gold in the morning on Monday. As for SAXO Bank distribution between bulls and bears, here the share of the longs takes up almost 72% of the whole market.