- Share of long trades decreased from 56% to 55%
- Bulls to push the price above 1,131 (2014 low)
- Bearish next interim target lies at 1,113
- Economic events to watch in the next 72 hours: Spanish Retail Sales (Jul) and HICP (Aug); Italian Business Confidence (Aug); Greek Revised GDP (Q2); Euro zone Business Climate (Aug); German CPI (Aug); US Personal Spending (Jul), Goods Trade Balance (Jul) and Consumer Sentiment (Aug); Jackson Hole Symposium (Day 2-3); Fed Stanley Fischer Speech; UK Second-Estimate GDP (Q2); BoE Governor Mark Carney Speech
Gold rose on Friday, though a stronger US Dollar kept bullion will below a psychological level of $1,150 an ounce. Strong US economic data supported the case for a near-term interest rate hike, diminishing investors' interest in the precious metal. The US economy grew more than previously estimated in the second quarter, supported by robust consumer and business spending. The world's number one economy expanded at an annual rate of 3.7% in the April-June quarter, more than a percentage point greater than the 2.3% originally estimated. Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, stood at 21.95 million ounces on Thursday, the highest level in five weeks.
Meanwhile, Japan's retail sales rose more than expected in July, adding to tentative signs consumption will support the economy and drive it back to growth in the third quarter. Retail sales jumped 1.2% on month in July, according to the Ministry of Economy, Trade, and Industry, coming in higher than the expected pace of 0.6%. The annual rise in sales accelerated from 0.9% in June to 1.6% last month, overshooting the median consensus forecast of 1.1%. Data published shortly before the retail sales report, however, showed household spending dropping 0.2% on an annual basis in July, against the expected 0.9% rise. Consumer spending has been patchy since the Japanese government hiked the sales tax in April 2014, leading to a recession and driving a contraction in GDP growth last quarter.
Upcoming fundamentals: UK GDP growth to be confirmed at 0.7%, US personal spending set to increase
Along with important Jackson Hole meetings and speeches of central bank officials, there are also important fundamentals to be released in the next 72 hours. Among them, British economy is likely to confirm its second-quarter growth at 0.7% on a quarterly basis and 2.6% year-on-year. The next indicator to watch will be US personal income and spending at 12:30 GMT, which are estimated to advance in July. However, the spending's growth rate is near the 2013 lows and has been falling since the middle of the previous year.
XAU/USD stuck in the vicinity of 1,125
Gold failed to consolidate below the 1,125 support mark reinforced by the weekly S1 on Aug 27. Therefore, bulls may count on a recovery in the near-term; however, a successful testing of resistance cluster at 1,128/31 is required, in order to sustain any potential rally. Therefore, unless this area is penetrated our outlook remains strongly bearish with respect to the precious metal, while the shorts are still targeting 1,113 (Aug 15-16 lows, monthly PP). Nonetheless, bullish views are in turn strengthened by overwhelmingly positive daily technical indicators.Daily chart
Our bearish projections are also confirmed by the one-hour chart, where the yellow metal keeps hovering well below the 200-hour SMA at 1,137 and 2014 low at 1,131. The mid-term outlook, however, will be influenced by gold's ability to slump as low as 1,113, the level where the bullion traded just before a recent surge.
Hourly chart
SWFX sentiment seems to consolidate below 60%
In the meantime, OANDA share of bulls is staying at 65.11% (+6%) of all current positions at the moment, while SAXO Bank traders are keeping as many as 64% of long open trades.