- Opened positions for Gold remain positive with a confident majority of bullish trades (74% bullish / 26% bearish)
- It is possible that Gold will grow in price further, with the closest resistance for it located at 1,290
- At the same time, the probability of a downside movement exists as well, while for that purpose the closest support is placed at 1,278
- Upcoming events on February 4: Japan, China, UK, Spain, Italy, France, Germany, Eurozone, US Services PMI (Jan), Italy GDP (Q4), Eurozone Retail Sales (Dec), US ADP Employment Change (Jan), FOMC Member Mester Speech, Canada Ivey Purchasing Managers Index (Jan), Japan Foreign Bond Investment (Jan 30)
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Gold traded comfortably above $1,270 an ounce on Tuesday, as the Reserve Bank of Australia decided to cut OCR, the latest sign that the world's economy is slowing down, thereby increasing demand for safety. The RBA cut the interest rate by 25 basis points to 2.25% for the first time in 17 months amid softer consumer inflation and weaker economic growth. Holdings at SPDR Gold Trust, the world's biggest gold-backed exchange-traded fund, were 24.65 million ounces on Monday, the highest since October.
Activity growth in the US manufacturing sector rose less than expected in January, being undermined by a strong US Dollar and weaker investment from the energy sector. According to Markit, the final US manufacturing PMI came in at 53.9 in January, the weakest reading in a year. Factory output growth and job creation remained well below last year's highs, raising prospects for a slower pace of growth in the first quarter, Markit said.
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Services PMI, US employment data to drive Gold on Wednesday
Following a surprising cut of the main interest rate by the RBA from 2.50% to 2.25% on Tuesday and a subsequent volatility of Gold prices, Wednesday of this week will bring another portion of fundamentals which may have some influence on the bullion's development. Several countries around the world will publish services PMI indicators. Along with that, ADP will release very important numbers on US employment change in January, which will be followed by the speech of Loretta Mester, Cleveland's Fed President.Read More: Fundamental Analysis
XAU/USD keeps medium-term bullish momentum
The XAU/USD cross has breached the most important resistance line on January 3, which is represented by the long-term downtrend at $1,218. Consequently, it started to develop above this level to hit $1,300 mark already on January 21. At the moment, it seems unlikely for Gold to be able to return back below $1,200 in the foreseeable future. Moreover, if the bullion manages to remain above $1,250, then we may see metal's further increase in the medium-term. Nevertheless, the long-term outlook for the yellow metal tends to remain negative, mostly reflecting strength of US fundamental factors and gradual recovery in Europe. Therefore, in towards the end of Q1 2015 gold is still suggested to lose value.Daily chart
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On February 2, the yellow metal tried to penetrate the closest support line represented by the weekly pivot point at $1,278. However, this level used to be strong enough for the bullion to cross it from the first attempt. After reaching the $1,274 mark, Gold bounced back to trade above the support. Moreover, additional difficulty is currently created by the long-term downtrend which will try to keep bears at a remote distance. Still, the near term outlook tends to be even neutral, rather than bullish.
Hourly chart
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SWFX opened trades on Gold remain broadly unchanged at 74%
Spreads (avg,pip) / Trading volume / Volatility
Traders, who were asked regarding their longer-term views on XAU/USD between Jan 3 and Feb 3 expect, on average, to see Gold trading just above 1,300 by the end of May. At the same time, 55% of them believe the bullion will be strongly above this mark in three months, while 32% of traders surveyed forecast the bullion to trade in the range between 1,150 and 1,300.
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