- Bullish market share was cut to four-week low of 62%
- Attention refocuses back on monthly pivot point at 1,086 after July low underpinned gold prices
- Daily technical indicators became broadly neutral on the precious metal
- Economic events to watch in the next 24 hours: German Trade Balance (Oct); US Wholesale Inventories (Oct), MBA Mortgage Approvals (Dec 4) and Crude Oil Inventories (Dec 4); RBNZ Interest Rate Decision; Swiss Unemployment Rate (Nov); Australian Employment Change and Unemployment Rate (Nov)
Bank of Canada Stephen Poloz said the economy does not need unconventional policies such as QE to boost growth, with a weaker local Dollar and recent rate cuts supporting the recovery. So far this year the central bank has lowered its benchmark interest rate two times, bringing it to 0.5%. However, Poloz admitted that Canada's economy could follow other countries, which have recently gone to negative interest rates. The Governor said "the effective lower bound for Canada's policy rate is around minus 0.5%, but it could be a little higher or lower". Poloz's comments suggested that the BoC still had more room to manoeuvre in response to negative shocks. Even though Poloz indicated that negative interest rates as a possible tool for the central bank, he also highlighted that it is not a guarantee the BoC will introduce these policies. The central bank predicts the nation's economy to return to full capacity around mid-2017, with the risks to the outlook being roughly balanced. The overall economy is growing, even as the resource sector contends with lower prices. The non-resource sectors of the economy are gathering steam, providing much-needed support to Canada's economy.
Consumer confidence in Australia slipped modestly in the lead up to Christmas, with the Westpac-MI consumer sentiment index falling 0.8% to 100.8. Despite the drop, overall sentiment levels remain 10.7% higher than a year earlier. A reading above 100-mark threshold indicates optimists outnumber pessimists. Sentiment towards economic conditions looking five years ahead fell by 11.3%. In contrast, gauges on family finances, both looking back a year and in the year ahead, rose strongly, adding 5.5% and 5.8% respectively. In addition, the sub-index indicating whether now was a good or bad time to purchase major household items increased by 0.8%. At the same time, 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. Business morale rose from 3 to 5 in the reported month, while 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.
Upcoming fundamentals: RBNZ rate decision, Australian labour market and US oil reserves
There is almost a 50% chance of a rate decrease from the Reserve Bank of New Zealand later on Wednesday. The regulator will announce its decision by 20:00 GMT. Currently the Official Cash Rate is 2.75%, but recent bullish developments for the Kiwi, slower inflation and weak jobs growth are putting pressure on the policymakers. On aggregate, analysts foresee a 25 basis points rate cut to 2.50%. The RBNZ has already slashed interest rates earlier this year for three times from June till September. Meanwhile, Australian employment data is out at 00:30 GMT on Thursday morning. Change in the number of people employed is projected to be -10,000 in November, following a climb of 58,600 jobs in October. The jobless rate has most probably ticked up from 5.9% to 6.0% during the same month. As for the world's biggest economy, the US oil stockpiles for the week ended Dec 4 will come out at 15:30 GMT. This data is closely watched by traders in the wake of the most recent price losses.
Gold supported by July low, weaker Dollar
Persistent instability of the Greenback's value and positive Chinese inflation numbers are creating demand for gold on Wednesday, following a rise we have already observed on Tuesday. Technical support is provided by July low at 1,070 and weekly pivot point at 1,073. The nearest resistance is 20-day SMA at 1,078. A surge above this level will expose the monthly pivot point at 1,086, which acted as an impassable supply last Friday. Meantime, trading volume slumped to the lowest level in four days, paving the way toward lighter volatility in the near term.Daily chart
The bullion touched 200-hour SMA on Tuesday, but was immediately sent back to the north by this support line. Therefore, our expectations remain relatively positive, based on the one-hour chart. However, the lack of vital fundamentals will weigh on market volatility in the next few days, and we expect no steep price changes.
Hourly chart
Percentage of bullish positions resumed decreasing
While the percentage of the bulls is sliding down in the SWFX market, the yellow metal remains heavily overbought in both OANDA and SAXO Bank markets. Yesterday OANDA's bulls pushed their market share even higher to 73.24%, while seven out of ten SAXO Bank traders are also gold-long today.