- 52% of all SWFX open positions are bullish, the highest number in 16 weeks
- Prices have to close below 1,207.87 (March low) on Tuesday in order to confirm this support
- Daily technical indicators maintain mixed views on gold
- Economic events to watch over the next 24 hours: German Retail Sales (Apr) and Unemployment Change (May); French CPI (May); Danish GDP (Q1); Euro zone Flash CPI (May); Italian GDP (Q1) and Unemployment Rate (May); US PCE Index (Apr), Personal Income (Apr), Personal Spending (Apr), Chicago PMI (May) and Consumer Confidence (May); Canadian GDP (Mar/Q1); Chinese Manufacturing PMI (May); FOMC Member Bullard Speaks
According to Canada's Statistics Bureau, the country's current-account deficit widened during the first three months of the current year to 16.77 billion Canadian dollars or $12.86 billion. The following release was largely in line with the market consensus for a $16.8 billion deficit, according to economists from Royal Bank of Canada. Meanwhile, the previous quarter's deficit was revised higher to $15.71 billion. Foreign investment in Canadian bonds was the largest contributor to the net inflow of funds in the economy. The deficit on international trade in goods expanded to $1.3 billion to $6.3 billion in the first quarter. The deficit on international transactions in goods, in turn, deepened to $6.34-billion from $5.04-billion. Overall, exports of goods plunged by $1.49-billion to $130.36-billion as soft crude prices cut the value of energy exports. The overall deficit on international trade in services narrowed by $171-million (US) to $5.65-billion (Canadian) as Americans increased their spending in Canada. In the meantime, the Raw Materials Price Index (RMPI) slipped to 0.7%, led by higher prices for crude energy products. The IPPI declined 0.5% in April, after falling 0.6% in March. The motorized and recreational vehicles commodity group (-2.1%) was the main reason for the drop in the IPPI in the previous month.
The US economy slowed in the first quarter although not as sharply as initially thought, amid a surge in spending on home building and a steady increase in inventory investment by businesses. According to the Commerce Department report released on Friday, the broadest measure of the US economic performance, expanded at an 0.8% annual rate between January and March compared to the previous reading of 0.5%. Despite the nation's gross domestic product in the first quarter of the year positive tendency, the indicator remains at its lowest level since the first quarter of 2015. Overall, the US economy has been hurt by a strong dollar and sluggish global demand, which have eroded export growth. However, there are signals that the US economy will rebound in the second quarter, with retail sales, goods exports, industrial production, housing starts and home sales soaring in April. In the meantime, during the Fed Chair press-conference, Janet Yellen gave a big hint that interest rates could be raised in June or July. Moreover, the Federal Reserve did not see the financial crisis coming, even though there were apparent clues. Yellen's comments renewed the market's conviction that the second rate hike of this cycle is approaching. Treasuries fell, while stocks, in turn, slipped to the lowest levels of the day.
Upcoming fundamentals: Canada's GDP to reveal a pick-up in Q1
Economic expansion data from Canada will be due at 12:30 GMT later on Tuesday, the last day of May. Markets estimate a zero monthly growth in March after a minimal downward change in the preceding month. At the same time, analysts foresee solid first-quarter results for the country's economy and the mean estimate suggests GDP surged 2.8% in January-March, up from only 0.8% in October-December. In the US, the PCE index is due at 12:30 GMT, with the Fed-preferred price indicator forecasted to advance in April. Personal income has probably added 0.4% over the same month and personal spending is expected to climb 0.6%.
Gold closes below March low
Daily chart: Despite the fact that yesterday the bullion failed for a ninth consecutive day and closed below the March low, a continuous decline is not on the table yet. Firstly, we should see a consolidation under this historical marker of 1,207.87 on Tuesday. There is no guarantee of such a scenario, given that daily technical studies are mixed today. However, if this mission is accomplished, then the bears should start aiming at the first weekly support of 1,193.94, followed by the long-term 2013-2015 downtrend at 1,186.25. Meanwhile, from the topside the closest supply can be found at 1,218.32 (100-day SMA).Daily chart
Hourly chart: Provided with the channel down pattern, inside which gold has been trading since May 13, the likelihood of a sell-off is quite high at the moment. This is because the bullion has just neared the upper border of the channel at 1,213. We would allow for a short-term drop below the crucial 1,200 level and possibly down to 1,193 when the pattern's lower edge is resting now.
Hourly chart
SWFX market sentiment turns positive on gold
Meanwhile, OANDA and SAXO Bank clients are also overwhelmingly positive with respect to gold, precisely in 68.5% and 62.24% of all cases in the morning on May 31.