- SWFX sentiment on gold is only 53% bearish, the lowest portion of short traders in 19 trading days
- Prices remain equally exposed to both bullish and bearish risks, as nearest resistances and supports are placed quite far away from the spot
- Daily and weekly indicators diverge from each other; separately, the former ones foresee a price drop
- Economic events to watch over the next 24 hours: Swedish Retail Sales (Feb); FOMC Members Williams and Kaplan Speak; Fed Chair Yellen Speaks; US Consumer Confidence (Mar); Japanese Industrial Production (Feb)
Gold fell slightly on Tuesday, but traded above a one-month low amid a weaker US Dollar and soft US economic data, which took pressure off the Fed to resume interest rate increases. Traders are awaiting Fed Chair Janet Yellen's speech later in the session on US interest rate outlook amid recent hawkish comments from other Fed officials. Last week comments from a number of Fed officials put investors on the alert for the possibility of at least two rate hikes this year, prompting a widespread correction across commodities and supporting the US Dollar.
Japan's retail sales climbed slightly for the first time in four months in February, but the overall picture for consumption remains weak. Retail sales increased 0.5% last month from a year earlier, according to the Ministry of Economy, Trade and Industry. The rise followed a 0.2% decrease in January. Measured on a monthly basis, retail sales declined 2.3%. The propensity to consume, a measure of households' willingness to spend rather than save, increased 3.9 points in February, the biggest rise in nine months. Japanese consumers have spent cautiously in recent months. Last quarter consumer spending was the biggest drag on Japan's economic growth, prompting the world's third biggest economy to shrank 0.3% over the quarter. Domestic consumption has mostly struggled since the government raised the sales tax in 2014. However, policy makers hope that if prices start to increase at a decent pace, consumers will be encouraged to spend, rather than put off purchases hoping that prices will decline. Yet, the Bank of Japan's efforts have been undermined by recent appreciation of the Japanese Yen, which is lowering import prices, thereby making it harder for inflation to reach the 2% target. In addition to that, weaker wages is also making it harder for the central bank to reach the price target, as workers have less disposable income to spend.
New orders for long-lasting US manufactured goods dropped in February for the third time in four months, as the sector continued to struggle with the lingering effects of a strong US Dollar and lower oil prices. Bookings for goods meant to last at least three years plunged 2.8%, following the 4.2% gain, the Commerce Department reported. Categories reflecting business investment were broadly sluggish, indicating that American companies remain cautious about spending. New orders for nondefense capital goods excluding aircraft, a proxy for business spending on equipment, dropped 1.8% in February after a 3.1% increase in January. Meanwhile, a separate report of the Labor Department showed the number of Americans applying for unemployment benefits climbed modestly last week, while revisions for prior weeks indicated the labour market was much stronger than previously estimated. Initial claims for state unemployment benefits increased 6,000 to a seasonally adjusted 265,000 for the week ended March 19. The prior week's claims were revised to show 6,000 fewer applications received than previously reported. The four-week moving average of claims, considered a better measure of labour market trends as it irons out week-to-week volatility, nudged up 250 to 259,750 last week.
Upcoming fundamentals: US consumers to feel much better in March
The Conference Board's index of consumer confidence for the world's largest economy tends to be the most important indicator of sentiment among US households. Analysts estimate that the March reading advanced to 93.9 points from only 92.2 points in February. There is no particular threshold, which divides improving conditions from worsening sentiment. Given recent market instability across the globe, any pick up in US consumer confidence is expected to leave a positive footprint in traders' minds. It is worth pointing out that more than 70% of the US economy accounts for consumer spending. The data is due later today at 14:00 GMT.
Gold hovers sideways at 1,215/20
On Monday the bullion was turbulent, as initially the bears led a decline below 1,210. However, all losses were erased by the end of the day, with falling Greenback sending gold back above 1,220. Over the next 24 hours, any spikes to the upside or dips lower can be wide. This is because the closest resistance is placed as far as 1,227 and the nearest support line in the monthly pivot point at 1,205. Aggregate daily indicators suspect XAU/USD will retreat today, but only a decrease below the 55-day SMA at 1,193 will, with a decent level of confidence, confirm bearish intentions of the market.Daily chart
The 1H chart is also sceptical on the matter of short-term slowdown in prices, as both February 26/22 lows have seen no confirmation yet. On the other hand, the outlook will not become bullish as long as the 200-hour SMA (1,236) remains intact. It is going to begin putting more downside pressure on prices and may determine gold's future over the next several trading sessions.
Hourly chart