- Opened positions on gold are strongly bullish (71% long / 29% short)
- The immediate resistance for the yellow metal is currently located at 1,107
- At the same time, the nearby support for the bullion is placed at 1,088
- Important economic events to follow in the next 24 hours: UK Public Sector Net Borrowing (Jun), Australia CPI (Q2)
© Dukascopy Bank SA
Following the 4% plunge to five-year low on Monday spurred by a sudden bout of selling in global markets, gold steadied on Tuesday, with investors still expecting further price falls. Reflecting losing appeal of gold, holdings in the wold's biggest bullion fund SPDR Gold Trust dropped to the lowest level since 2008. A looming hike in US interest rates has been the major driver in gold's decline along with sluggish demand in world's top bullion consumers China and India.
Meanwhile, the Reserve Bank of Australia said growth likely slowed in the second quarter, while the Australian Dollar continues to offer little assistance. The RBA lowered borrowing costs two times this year as it attempted to accelerate a transition towards service and manufacturing industries as a decade-long mining boom continues to fade. However, the flipside of the easy policy is emergence of a housing bubble in Sydney and Melbourne. Thus, the central bank would prefer a weaker currency to increase competitiveness of local businesses.
Watch More: Dukascopy TV
UK government borrowing to decrease further, Australian inflation to pick up in Q2
Analysts expect the UK public sector borrowing to drop noticeably in June of this year, falling from 9.4 billion pounds to 8.6 billion pounds on a monthly basis. Moreover, some improvement is also forecasted to take place on an annual basis. The data is due today at 8:30 AM GMT. Meanwhile, Australian second-quarter inflation statistics will be announced at 1:30 AM GMT tomorrow morning. Markets estimate the consumer price index to surge 0.8% on a three-month basis, up considerably from just 0.2% seen in January-March. The annual inflation is in turn predicted to show a healthy 1.7% rise.Read More: Fundamental Analysis
XAU/USD develops inside bearish wedge pattern on daily chart
Since the second quarter of 2013, the bullion has been developing inside the falling wedge pattern, meaning that trading range is decreasing as time goes on. Two pattern's boundaries are represented by the upper trend-line around 1,270 and pattern's support at 1,115. Among recent developments, in March 2015 the yellow metal resumed gaining value, even without touching the lower trend-line, but the growth stalled beneath the 2009 high at 1,230. In the foreseeable future the rally is likely to be limited and the bullion should be driven by the 200-day SMA around 1,200, which has a slight bearish bias. Some short-term gains in the direction of the long-term downtrend (1,270) are not completely off the table, but bears are eventually going to overtake a lead and drive the metal back to the south. The overall negative tendency for gold seems to be the case in the long run, while at the end of this year the precious metal should to consolidate around 1,150, in case the present trend persists.Daily chart
© Dukascopy Bank SA
XAU/USD closed below the long-term downward-sloping line on Monday, even though the bullion showed some signs of a recovery after a slump that took place earlier in the beginning of the day. In case gold fails to return above 1,107 in the next 24 hours, the metal's outlook will deteriorate significantly. The only weekly or monthly support is currently represented by the weekly S3 at 1,088. This level is followed only by the 2010 low at 1,044. Moreover, any confident rebound will be extremely difficult to organise in the short-term amid a dense cluster of resistances around 1,110.
Hourly chart
© Dukascopy Bank SA
Read More: Technical Analysis
SWFX sentiment strongly bullish towards gold
OANDA's bulls are in the safe majority with 65.95% of all current positions, but their share has already dropped 14% since Friday. Still, this sentiment is the third most positive among all major crosses at the moment. On the contrary, Saxo Bank market participants have become even more optimistic towards the precious metal, as there are 73% of bullish trades registered in the morning on July 21, up five percentage points on a daily basis.
Spreads (avg,pip) / Trading volume / Volatility
Traders, who were asked regarding their longer-term views on XAU/USD between Jun 21 and Jul 21 expect, on average, to see Gold trading just below 1,150 by the end of October. At the same time, 48% of them believe the bullion will be strongly above this mark in three months, while 38% of traders surveyed forecast the bullion to trade in the range between 1,000 and 1,150.
© Dukascopy Bank SA