- SWFX traders are moderately bullish with respect to gold, namely in 55% of all cases
- Expectations for more central banks' stimulus to support short traders of gold
- RSI indicator suggests that gold is neither overvalued nor undervalued in short, medium and long run
- Economic events to watch in the next 24 hours: World Economic Forum in Davos (Day 3); French, German and Euro zone Flash Manufacturing and Flash Services PMI (Jan); US Manufacturing PMI (Jan) and Existing Home Sales (Dec); ECB President Draghi Speaks; UK Retail Sales (Dec) and Public Sector Net Borrowing (Nov); Canadian Retail Sales (Nov) and CPI (Dec)
Initial claims for unemployment benefits in the US surged to the highest level in six weeks for the five-day period ended January 16, judging by the Labour Department's data released Thursday. Such a move was somewhat unexpected for the markets that expected a decline from 283,000 to 279,000. However, the real weekly number came out at 293,000. This statistics coincides with the time frame when US officials are starting to survey businesses and households about employment conditions in January. Recent setbacks in terms of oil prices and strong US Dollar are putting more pressure on energy and manufacturing sectors' headcounts. Despite that, only a sustained increase in unemployment claims will be able to signal some weakness in the US labour market. In the meantime, one of the closely watched manufacturing surveys in the US showed conditions are moving towards improvement in the Philadelphia Fed district. Survey of industrial sector produced a reading of –3 points for January, up from –5.9 points in the preceding month. At the same time, positive outlook will be affirmed only after the indicator comes back above zero. For now producers are hit by weaker global demand for US-producer goods, as new orders are falling sharply. As for the oil price rout, the Third Federal District, which includes Philadelphia, is less impacted by price declines due to smaller dependence on energy sector.
China's industrial production and retail sales data disappointed in the last month of 2015. Output from the nation's mines, factories and utilities rose 5.9% in December from a year ago, slowing from the 6.2% growth in November, the National Bureau of Statistics reported. Analysts, however, had predicted industrial output to increase 6.1%. Worse-than expected output data signals persistent weakness in factory activity at the end of the year. For the full year of 2015, China's industrial production increased 6.1%, compared with an 8.3% surge in 2014. At the same time, retail sales soared 11.1% in December from a year earlier, slowing from 11.2% rise in the preceding month and also missing expectations for an 11.2% advance for December. China's economy grew at the slowest pace in 25 years in 2015, increasing pressure on Beijing to act to address concerns of prolonged slowdown in the world's second biggest economy. In 2015, the Chinese economy expanded at a 6.9% pace, compared with officials' expectations for a 7% growth and down from 7.3% in 2014. In the final quarter of the year, GDP increased 6.8%, compared with September quarter's growth of 6.9%. To combat slowing growth, the Chinese government has unleashed a slew of easing measures, including interest rate and reserve requirement ration cuts from the PBoC.
Upcoming fundamentals: Canadian inflation and UK retail sector
On Friday many countries including Canada, US, UK and Euro zone will publish important statistics, which is going to influence equity, FX and commodity markets in course of all daily sessions today. Separately, US manufacturing sector is expected to continue growing, albeit only at the moderate pace. Flash PMI for production sector could spike to 51.5 points in January from 51.2 points last month. As for existing home sales (15:00 GMT), which took a major downward hit in November by decreasing to 4.76 million, today economists see them recovering back above 5 million sales on a yearly basis. Canadian data will be out at 13:30 GMT, with retail sales anticipated to grow in November and inflation estimated to slump in December by 0.3-0.4% month-on-month. Meanwhile, retail sales in Britain have probably dipped by 0.1% in December, following a positive report which had showed a 1.7% increase in November.
Gold: negative outlook below 1,104/08
Near-term outlook for gold is moderately bearish. We see the formidable resistance zone ahead of the bullion, represented by 100-day SMA and Jan 8-20 downtrend at 1,104/08. Any close above here should trigger a rally, but the bulls are likely to struggle at 1,126/32 (monthly R3/200-day SMA). On the bearish side, we would allow for a selloff down to 1,087 (20-day SMA and monthly R1), followed by two-month uptrend and 55-day SMA at 1,076. A drop below here will increase downside pressure on gold in the mid-term, but some support should be in place at 1,065 (monthly PP) and at 1,046 (2015 low) later.Daily chart
In case the bulls manage to get a proper support from 200-hour SMA at last month's high at 1,090/88, then an advance towards Jan 8-20 will become the base scenario for the next 24 hours and the weekend. Any rally above 1,109 will later struggle at much higher levels around 1,123 (a trend-line connecting Dec-Jan highs).
Hourly chart