- Share of long open trades fell from 59% to 57%
- Bullish traders to set eyes on 100-day SMA and 61.8% retracement
- Bearish case to be complicated by strong demand zone at 1,134/24
- Economic events to watch in the next 24 hours: German Bundesbank Monthly Report; US Existing Home Sales (Aug); FOMC Member Lockhart Speaks; Canadian Wholesale Sales (Jul); Bank of Canada Governor Poloz Speaks; Australian House Price Index (Q2)
On Monday, gold traded near its highest level in almost three weeks, supported by safe haven demand after the Fed left interest rates unchanged last week. The decision to keep rates on hold is positive for non-interest-paying bullion, which could see demand decline with higher rates. Gold prices have plunged about 4% this year amid uncertainty over the timing of a rate hike in the US. With the Fed projected to raise rates before the end of the year, the precious metal could come under pressure again
Meanwhile, Canada's annual inflation remained unchanged in August as lower gasoline prices offset the higher cost of food, suggesting the Bank of England has room to keep interest rates low. The nation's inflation was 1.3% in August measured on an annual basis, unchanged from July. At the same time core inflation, which strips out volatile components, declined to 2.1% from 2.4% in July. Prices rose on an annual basis in seven of the eight major components of the consumer price index. Food saw the biggest jump, with prices surging 3.6%, whereas gasoline prices continued to decline and were down 12.6% on a yearly basis.
In addition to that, the Bank of Japan's minutes from the central bank's meeting on August 6 and 7 showed that the members of the monetary policy board maintained their optimistic views over the country's economic recovery, saying that the weakness in Japan's output and exports was temporary. As it was already announced earlier last week, the BoJ decided to keep its monetary policy unchanged and also maintained its inflation and economic growth outlook. However, the nine-member board agreed that the central bank must be vigilant to the risk of a decline in exports from a prolonged slowdown in China and other emerging economies. In the meantime, policymakers concurred that emerging economies had suffered from a weak growth, but were likely to improve from a longer-term perspective.
Upcoming fundamentals: BoC Governor to speak on economy today
Governor of the Bank of Canada Stephen Poloz is going to give a speech in Calgary on Monday. Topics discussed will include commodity price developments and Canadian economy. Canada has been suffering from lower oil prices, while economy entered a recession phase in the second quarter of this year, after cooling down for two consecutive three-month periods. Poloz is likely to admit that the soft monetary policy stance will stay in place in the medium term.
Gold eroded 2014 low and pierced through 1,140
Gold surged on Friday, thus prolonging a winning streak to three days in a row. Both 2014 low and 50% Fibonacci retracement of Aug-Sep downtrend were violated by bulls the same day. However, momentum used to be exhausted by time the bullion came closer to 100-day SMA/61.8% retracement at 1,141/42. A climb above this supply should expose August highs at 1,170 in the medium term. Alongside, a reversal of the uptrend is going to be complicated by major support area, with important technical levels scattered between 1,134 and 1,124.Daily chart
Bullish outlook is reinforced by the bullion's trading in the one-hour chart. The 200-hour SMA is $25 below the spot price, while the majority of important levels have recently been penetrated. Bulls are targeting the 61.8% Fibonacci retracement (1,142) at the moment.
Hourly chart
57% of SWFX traders see gold higher
In the meantime, OANDA share of bulls was down to 65.18% of all positions, while SAXO Bank traders are keeping 63% of long open trades, down slightly during the past 72 hours.