- SWFX traders are unchanged in their preferences towards gold (55% short/45% long)
- Prices are underpinned by 20-day SMA; initial resistance is created by a monthly downtrend at 1,077
- Daily technical indicators remain uncertain with respect to gold
- No major economic events are due this week
Gold dropped on Monday as oil prices declined despite weakness in the US Dollar and Asian equities. Liquidity remains thin as some markets, including Australia and many in Europe, are closed on Monday after Friday's Christmas holiday and, many will be shut this Friday for New Year's Day. Meanwhile, assets in SPDR Gold Trust, the world's top gold exchange traded fund, stays near a seven-year low, reflecting bearish investor sentiment.
The number of Americans applying for unemployment benefits declined more than expected last week, adding to signs labour market conditions continued to tighten. Initial claims for jobless benefits decreased 5,000 to a seasonally adjusted 267,000 in the week ended December 19, near levels last seen in late 1973, according to the Labor Department. Economists had projected claims falling to 270,000. Claims have been below 300,000, a threshold associated with a strong labour market, for 42 weeks in a row, the longest stretch since the early 1970s. The four-week moving average of claims, considered a better measure of labour market trends as it irons out week-to-week volatility, climbed 1,750 to 272,500 last week. The report also showed the number of people still receiving benefits after an initial week of aid dropped 47,000 to 2.20 million in the week ended Dec. 12. The four-week moving average of the so-called continuing claims rose 10,000 to 2.21 million. Improvements in the labour market is helping to boost consumer spending, supporting the world's biggest economy as it faces the headwinds of a strong Dollar, slowing global growth, spending cuts by energy firms and an inventory overhang. The US jobless rate was at 5.0% last month, the lowest level in more than seven years.
Canada's economic growth was unexpectedly flat in October after shrinking a month earlier, due to drop in manufacturing, utilities and retail sales, Statistics Canada reported. Manufacturing production slid 0.3%. The declines offset a 0.8% increase in mining and oil and gas extraction in October. Economic output was little changed at an annualized C$1.64 trillion compared with September, when the economy shrank 0.5%, the most since March 2009, whereas economists had predicted a 0.2% gain in October. Economists expect growth to slow to 1.2% this year from 2.5% in 2014. The Canadian economy will have to wait for at least two years before growth returns to where it was before the plunge in oil prices. The nation's economy is seen growing 1.8% in 2016 and 2.1% in 2017. Investors are increasing bets Bank of Canada Governor Stephen Poloz will cut the 0.5% interest rate as oil prices hit new lows and growth in many other industries fails to take up the slack. Furthermore, Canada's retail sales rose a modest 0.1% in October, following an upwardly revised decline of 0.4% in September. The October data was a disappointment as economist had anticipated a 0.4% growth.
Gold remains calm as trading volume slumps
In the run up to Christmas holidays gold recovered past 20-day SMA to close at 1,075. As the volume of trading kept declining, volatility of price changes was quite insignificant. Given that there are no major statistical events throughout a new week, we foresee the bullion to develop in a horizontal trend by using the weekly pivot point and 20-day SMA (1,072/73) as key anchors. For the bulls, an extra supply is offered by the Nov-Dec downtrend at 1,077. Therefore, longer-term perspectives for January are still skewed to the downside.Daily chart
Conversely, in the one-hour chart the outlook is moderately bullish at the moment. The price is holding to recent gains above the vital support represented by 200-hour SMA at 1,070. At the same time, any potential drop below this line could trigger a sell-off towards the Dec 17 low below 1,048.
Hourly chart
Sentiment unchanged during Christmas holidays
Alongside, the share of OANDA bullish transactions held flat at 72% over the long weekend. SAXO Bank sentiment towards the precious metal was also completely unmovable at 70.43%.