- The gap between long and short traders resumed narrowing, down to eight p.p. by Wednesday morning
- Prices are on course to penetrate a vital support zone at 1,084/80
- Short-term technical indicators are projecting a rebound for gold prices
- Economic events to watch in the next 24 hours: French CPI (Dec); ECB Non-Monetary Policy Meeting; Euro zone Industrial Production (Nov); FOMC Members Rosengren and Evans Speak; Fed Beige Book Release; US Monthly Budget Statement (Dec) and Crude Oil Inventories (Jan 8); Japanese Machinery Orders (Nov); Australian Employment Change and Unemployment Rate (Dec)
Gold also dropped on Wednesday as a recovery in stock markets dented bullion's safe-haven appeal. Additional pressure on the precious metal came from a strengthening US Dollar. The US labour market continued to tighten as job openings rose, while quits rate remained steady, supporting the Fed on the path to normalizing monetary policy. The number of vacant positions climbed to 5.43 million in November following a downwardly revised 5.35 million openings a month earlier. Meanwhile, holdings of the world's top gold-backed exchange-traded fund, SPDR Gold Shares, climbed 2.1 tonnes on Monday.
The US labour market continued to tighten as job openings rose, while the quits rate remained steady, supporting the Fed on the path to normalizing monetary policy. US companies are struggling to fill a higher number of job vacancies than in much of the past 12 years. Many workers hesitate to quit their job, signalling Americans remained concerned about employment prospects even with 5% jobless rate. The number of vacant positions climbed to 5.43 million in November following a downwardly revised 5.35 million openings a month earlier, according to the Labor Department. The number of openings increased from 4.89 million a year ago, after having reached a record-high of 5.67 million in summer. The JOLT report followed a series of other labour market indicators, which pointed to some improvement in the market. Last week, the monthly jobs report showed almost 300,000 jobs were created in December. Furthermore, the report showed companies hired a total 5.2 million workers in November, compared with 5.17 million a month earlier. The hires rate held at 3.6%, where it has been steady since hitting the high of the current business cycle at 3.7% in June. Meanwhile, the quits rate was steady at 2% in November, shy of its pre-recession peak of 2.3% reached in November 2006, when almost 3.1 million quits were registered.
China's trade surplus swelled, as exports increased for the first time in six months, while imports dropped for the 14th straight month. The nation's trade surplus widened to $60 billion in December, taking the full year tally to $594.5. Exports rose 2.3% in the report month from a year ago, compared with economists' forecast for a 4.1% decline. However, outbound shipping declined 1.4% in US Dollar terms. The surge in exports last month may appear to be temporary one due to seasonal jump at the end of the year and it does not represent a trend. Imports extended a stretch of declines to 14 months, plunging 4% in yuan terms, following a 5.6% decrease a month earlier. In US Dollar terms, imports plunged 7.6% from a year earlier, against expectations for a 11% drop. China imported a record number of crude last year, as oil's lowest annual average price in more than a decade encouraged stockpiling and boosted demand from independent refiners. Being the world's largest energy consumer, China increased imports 8.8% to a record 334 million metric tons in 2015. The fresh data came as somewhat a relief to policy makers after China's recent run of disappointing news, which caused a 13% equity price plunge since the beginning of the year.
Upcoming fundamentals: US oil stockpiles to surge; FOMC members to speak
Trading session in the US will be busy in the middle of this working week, as two members of the Fed's FOMC committee will speak and important fundamentals are due to be published as well. Federal Reserve Bank of Boston President Eric Rosengren will talk about US economic outlook at 13:00 GMT. He is a voting member in 2016 and one of the most dovish FOMC participants. Another dovish member to speak today at 17:30 GMT will be Charles Evans, the Chicago Fed President and alternate FOMC member this year. He is going to deliver remarks on current economic conditions and monetary policy. Meanwhile, US crude oil inventories are expected to jump by two million barrels for the week ended January 8. Both gasoline and distillate stockpiles will probably show gains, albeit at a somewhat slower pace than for the week ended the first day of 2016.
Gold is on track to test demand at 1,084
A continuous move away from fixed income and safe-haven assets is putting more pressure on gold prices. They slid down on Tuesday, by nearing one of the most important support clusters at 1,084/80 represented by the monthly R1 and 55/20-day SMAs. On Wednesday we expect these levels to be tested, but bearish success is not guaranteed for the moment. Given that daily technical indicators estimate a rebound, we cannot rule out such a scenario in the next 24 hours. However, in case XAU/USD closes below 55-day SMA the focus will switch to the monthly pivot point at 1,065.Daily chart
After confirming the bullish channel in the one-hour chart, gold is now building a downward-sloping pattern. Moreover, a key support (200-hour SMA) is now being tested, meaning the risks are skewed strongly to the downside. Any consolidation below 1,086 should firstly reopen current January lows around 1,061, followed by 2015/2010 lows at 1,046/44 in the medium-term.
Hourly chart