- Share of long open trades is back below 60%
- Bullion fails to overcome 2014 low despite dovish Fed decision
- Bulls may rely on support from monthly pivot point at 1,128
- Economic events to watch in the next 24 hours: Euro zone Current Account (Jul); Greek Parliament Election; Canadian CPI (Aug); BoE MPC Member Haldane Speaks; FOMC Member Fischer Speaks
Gold traded near the highest level in two weeks on Friday and was poised to snap a three-week losing streak as the Fed decided to keep interest rates unchanged in light of worries about the global economy, financial markets turbulence and tepid domestic inflation. Yet, the US central bank left the door open for a modest policy tightening later this year. Thus, the precious metal relief rally would not last long as the Fed's decision to refrain from raising rates this week only adds to the uncertainty over the timing of an eventual rate hike. Bullion had been weighed down all year amid fears the US central bank would soon hike interest rates for the first time in nearly a decade. Higher rates could sap demand for non-interest paying bullion, while supporting the US Dollar.
Meanwhile, Reserve Bank of Australia Governor Glenn Stevens delivered another optimistic assessment of the Australian economy, highlighting it could weather a serious China's slowdown. Stevens' statement appeared to lower the chances of the central bank cutting the official cash rate further from its current all-time low level of 2%. Moreover, the central bank's Governor even said that a hard landing for the world's second largest economy, where annual growth would decline below 7%, may not be enough to trigger another rate cut. Australia slashed rates twice this year to a record-low 2% to underpin investment and consumption as economic growth remains below its long-term average of more than 3%.
Upcoming fundamentals: MPC, FOMC members to speak during the weekend
On Friday and Saturday members of the Bank of England's Monetary Policy Committee and the Federal Open Market Committee will speak before the members of public. Chief Economist at the Bank of England Andy Haldane will give a speech at the Portadown Chambers of Commerce in Northern Ireland, while San Francisco Fed President John Williams will speak in New York. Both events are considered important as analysts are waiting for any hints concerning the future normalisation of monetary policy.
Gold encounters 2014 low on the way upwards
As expected, gold prices advanced after the Fed decision to maintain the current stance of monetary policy. However, a daily rise was smaller than initially anticipated as bulls failed to penetrate the most crucial resistance represented by the 2014 low at 1,131. A failure to consolidate above this mark for a second consecutive time may lead to a sell-off in the nearest future. Bears are aiming at the 55-day SMA right now, which is opening doors towards the 1,100 psychological level. On the contrary, daily studies are neutral and we may also observe the sideways trading at the end of this working week.Daily chart
The one-hour chart seems to be supporting the bullish scenario for the precious metal. In particular, positive sentiment is reinforced by the fact that gold has recently breached the 200-hour SMA at 1,113. However, penetration of the 2014 low is one additional bullish task to be accomplished in the short term.
Hourly chart
SWFX sentiment remains positive on Friday
In the meantime, OANDA share of bulls increased marginally to 67.58% of all positions, while SAXO Bank traders are keeping 65% of long open trades, no change in the past 24 hours.