- Bullish market share is steady at 64%; risks are skewed in favour of bears
- Monthly PP (1,086) rejected further recovery; July low returns back into focus
- Daily technicals are not bullish on gold any more
- Economic events to watch in the next 24 hours: French Trade Balance (Oct); Euro zone Revised GDP (Q3); US JOLTS Job Openings (Oct); UK Manufacturing/Industrial Production (Oct) and NIESR GDP Estimate (3M-Nov) Canadian Housing Starts (Nov) and Building Permits (Oct); BOC Governor Poloz Speaks; Japanese Machinery Orders (Oct); Chinese CPI and PPI (Nov)
As for gold, it traded near the highest level in three weeks on Monday as renewed Euro strengthens and US Dollar weakness drove further short covering in gold. The Greenback failed to gain much traction following better-than-expected payrolls data. The world's number one economy created 211,000 jobs last month, a solid pace that would help push the economy closer to full employment. Economists had expected the 200,000 increase. The jobless rate remained steady at a seven-year low of 5.0%. Meanwhile, assets in SPDR Gold Trust, the top gold-backed exchange-traded fund, are at their lowest since September 2008.
The Japanese economy avoided a technical recession in the third quarter, a revised official data showed. The world's third biggest economy grew 0.3% in the reported period, compared with –0.2% estimated initially. The revision offers some relief to Prime Minister Shinzo Abe, who has made reviving the nation's economy a top priority for his administration. Nevertheless, Japan's economy continues to underperform, after being in recession four times since the global financial crisis. Measured on an annual basis, economic output rose 1%, compared with the first estimate of a 0.8% contraction. Private inventories were revised from a 0.5% decrease to a 0.2% drop, while gross fixed capital formation was revised from a 0.1% decline to a 0.1% increase, adding 0.1 percentage points to growth over the quarter. Even though the world's third biggest economy managed to escape recession in the third quarter, the chances of a near-term recovery look limited as policy makers continue to refrain from adding large-scale stimulus. Meanwhile, a separate report showed Japan's current account surplus doubled in October, driven by an improvement in the primary income balance. The seasonally adjusted current account surplus rose from 776.2 billion yen in September to 1.49 trillion yen in October.
Australian business confidence recovered modestly in November, while business conditions remained at high levels, signalling a rebound in business investment may be round the corner. According to National; Australia Bank's monthly business survey, business morale rose from 3 to 5 in the reported month. The improvement, while still below the long-run average, was likely due to improved prospects for the Australian economy, outside of mining, being partially offset by the uncertainty towards the global economic environment. At the same time the NAB business conditions index remained at 10 after being revised up from 9 in October, well above the long-term average of 5 points. Business sales inched up two points since October to +18, while profitability increased 3 points to +13 in November, and employment edged two points lower to +1.
Upcoming fundamentals: UK production sector to be back in red in October
Following two consecutive months of gains, manufacturing industry in the United Kingdom is likely to register a month-on-month decline of 0.1% in October of this year. At the same time, manufacturing makes up only about 80% of the whole industrial production, which in turn includes output data from mines and utilities. Industrial production reading is expected to come out at zero in October, following a 0.2% drop in the preceding month. In the meantime, analysts are closely watching the CPI data from China, the world's second largest economy. In October the indicator stood at 1.3% on a yearly basis, and now the survey's average forecast is 1.4% for November. Producer prices, however, have probably continued to hover deeply in red by 5.9% YoY last month.
Gold's correction is stopped by July low at 1,070
Volatility of gold prices remains quite high for the moment, as we are nearing the crucial meeting of the Fed, which is weighing on the Dollar's value. Yesterday we saw the bullion tumbling from Friday highs at 1,085 to July low around 1,070. The monthly pivot point used to be a heavy obstacle for the bulls, meaning short traders are confident in their commitment of pushing prices lower in the mid-term. We are watching the summer low today, a decline below which should prolong a sell-off in the direction of the long-awaited 2010 low at 1,044.Daily chart
XAU/USD may get a chance to recover in the next 24 hours, given that the price has approached the 200-hour SMA, currently at 1,066. In case the bears win in the battle against the moving average line, it will proclaim that the yellow metal returned into the boundaries of the old channel down pattern. This fact will shift further expectations considerably to the downside.
Hourly chart
SWFX bulls maintain their share at 64%
At the same time, the yellow metal remains heavily overbought in both OANDA and SAXO Bank markets. OANDA bulls pushed their market share above 72% today, while SAXO Bank traders are gold-long in slightly less than 71% of the cases.