- Bullish market share surged to 57% by Monday morning
- Prices to decrease volatility this week; sideways trend expected
- Daily technical indicators are mixed on both daily and weekly bases
- Economic events to watch in the next 24 hours: German Trade Balance (Sep); Eurogroup Meeting; US Labour Market Conditions Index (Oct); Canadian Housing Starts (Oct); Australian NAB Business Confidence (Oct); Chinese CPI (Oct); Japanese Current Account (Sep)
Gold recovered some of the loses on Monday, following an eight consecutive days of declines, but traded near the lowest level in three months as considerably better than expected data on US nonfarm payrolls strengthened the case of a December rate hike. Nonfarm payrolls surged 271,000 last month, the biggest increase since December 2014, according to the Labor Department. The number was well above economists' expectations of 182,000 new jobs. Assets in SPDR Gold Trust, the top gold-backed exchange-traded fund, dropped 0.40% to 669.09 tonnes on Friday, the lowest level in nearly three months, reflecting investors' sentiment towards bullion.
US employment report joined October's robust services sector and auto sales data in reinforcing views that economic growth will regain steam in the fourth quarter after slowing down sharply to a 1.5% annual pace in the July-September period. The services sector added 241,000 jobs in October, with large gains in retail, health and leisure. Fed policy makers will see one more employment report released in December, about two weeks prior to their final meeting this year. However, given the strong rebound in payrolls in October, few rate setters should doubt that the economy's readiness for a rate hike.
Meanwhile, China's trade data disappointed in October, strengthening the case for more stimulus to underpin domestic demand in the world's second biggest economy amid softness in overseas markets. Even though the Chinese government has already cut interest rates several times this year and softened the exchange rate to support the ailing economy, latest trade report suggests that a greater risk of hard landing remains. Exports plunged 6.9% last month from a year ago, falling for a fourth consecutive month, while imports plummeted 18.8%, resulting in a record high trade surplus of $61.64 billion, the General Administration of Customs reported. In contrast economists had predicted exports to slide 3.0% following September's 3.7% decline and imports to drop 16.0%, improving from a precipitous fall of 20.4%. Other data this week are expected to show continued deflation in the industrial sector, and consumer-price inflation easing in October to a 1.5% annual pace.
Upcoming fundamentals: Data from Asia to fill in calendar with events on Monday
While many fundamental indicators in Europe and US have already been published throughout the previous working week, we expect the Asian market to be dominant in this week's events. At 23:50 GMT on Monday the September current account data from Japan will be known, while analysts see a slight decrease of surplus to 1.5 trillion yen, down from 1.59 trillion yen in August. Alongside, Australian business confidence index is due at 0:30 GMT on Tuesday. The indicator is calculated and presented by the National Australia Bank. Meanwhile, economists estimate the consumer price index to cool down in China, down from 1.6% to 1.5% in October on a monthly basis. This is going to be the lowest reading since June 2015.
Gold touches 1,090 after US labour market data
There was no chance given to the bullion to commence any kind of recovery on Friday, owing to strongly optimistic jobs report for October. XAU/USD slid below the major 1,100 mark, which was guarded by the monthly S1. Our medium term expectation is refocusing on the Jul low around 1,070 and supports appreciating US currency. At the same time, short term development is highly likely to be little turbulent amid lack of fundamental drivers on Monday and Tuesday. This scenario is shared by mixed daily and weekly technical indicators.Daily chart
On Thursday we assumed that gold would fail to hold inside the channel down pattern in case of encouraging US employment statistics. Indeed, XAU/USD managed to close below the southern boundary, but we observe some marginal revival in terms of prices. It confirms that additional gains in the short term are possible, but we are looking at 1,105 as the closest supply for gold.
Hourly chart
SWFX sentiment improves further on closure of short positions
Meantime, OANDA's long traders are gaining even higher market share on day-to-day basis, while the total number of their open positions rose from 74.7 % to 74.9% over the weekend. On top of that, 69% of SAXO Bank clients preserve their positive stance with respect to gold.