- Only marginally more than three out of ten SWFX traders are betting on gold's advance
- Uptrend at 1,247 was crossed; gold should trade below this level on March 22 to confirm bearish intentions
- Both daily and weekly aggregate indicators are positive on gold
- Economic events to watch over the next 24 hours: Swiss Trade Balance (Feb); French, German and Euro zone Flash Manufacturing/Services PMI (Mar); German IFO Business Climate (Mar) and ZEW Economic Sentiment (mar); US HPI (Jan); FOMC Members Evans and Harker Speak; UK CPI (Feb) and Public Sector Net Borrowing (Feb); MPC Member Forbes Speaks
Gold stabilized on Tuesday following three-day decline, but looked at risk for further drops as the US Dollar rose on comments by Atlanta Fed President Dennis Lockhart that the next US interest rate hike could occur as soon as next month. Mr Lockhart's hawkish comments sparked uncertainty about policy makers' intentions less than a week after Fed Chairwoman Janet Yellen voiced a cautious approach to rate increases this year.
Sales of previously owned US homes declined more than expected in February after hitting the second highest level since 2007, a sign that demand for housing could be weakening due to increasing prices and low inventory. The National Association of Realtors reported that existing home sales plunged 7.1% in February from the preceding month to an annual rate of 5.08 million units, the lowest level since November. Economists, however, had expected a modest decline of 2.6% to a rate of 5.33 million in the reported month. A strong growth in residential real estate is being undermined by a limited availability of properties that has led to higher offering prices. The median price for a previously owned home soared 4.4% from a year ago to $210,800. Housing was a strong side of the US economy throughout 2015, contributing more than a quarter of a percentage point to GDP growth over the year. Historically, low interest rates and a sturdy improvement in the job market could lend it support, but prices have increased in many markets amid lack of supply, and construction levels for new homes remain historically low. According to the Commerce Department, housing starts increased 5.2% last month, but home builders continue to report land and labour shortages, resulting in delays in projects' completion.
US consumer confidence unexpectedly worsened in March for the third consecutive month due to concerns of increasing petrol prices and mounting expenses, while the complex labour market situation is undermining any rise in salaries and wages, even though increasing number of people are being employed. The Thomson Reuters/University of Michigan preliminary Consumer Confidence Index dropped to 90.0 points in March, compared with the final 91.7 seen in the prior month, when it had declined to a fresh three-month low. The consumer confidence index reached its all-time high in January 2000, at 112, decreasing thereafter. The gauge has never climbed above 100 again since 2004. Meanwhile, St. Louis Fed President James Bullard said that the Fed's inflation and employment goals have essentially been met and it would be "prudent" to hike interest rates. Bullard was among the majority of Fed officials who voted to keep rates on hold at the central bank's two-day meeting last week, and he has expressed concern recently about a decline in inflation expectations. However, those expectations have been moving higher lately, and Bullard said that he now feels "inflation net of the oil price shock is reasonably close to target." Yet, he did not indicate when the next interest rate hike should occur.
Upcoming fundamentals: Daily insight suggests high importance of UK CPI data
The macro session on Tuesday is foreseen to be very busy, with many indicators released both in Europe and abroad. There are also officials' speeches, included in the calendar, and they are worth to be followed. For gold and US Dollar traders it is important to follow speeches from two FOMC members later on Tuesday. Charles Evans from the Chicago Fed and the alternate FOMC member will talk at 17:30 GMT in Chicago. His speech will be followed by Patrick Harker from the Philadelphia Fed at 23:00 GMT. A high influence on global markets will be created by the upcoming UK inflation data at 9:30 GMT. Economists, on average, expect that the consumer price index ticked up to 0.4% in February on a yearly basis from 0.3% in January.
Gold: key watch on long-term uptrend at 1,247
Gold has formally broken the long-term uptrend line near 1,245 yesterday, but it has a chance to show the bulls remain active. The drop was caused by stronger Greenback, which recovered after the astonishing slide last week. The key watch is on 1,250 for the next 24 hours. Ability to close above here will revive the possibility of a rally beyond the February high located at 1,263.50. The main support is still offered by the 20-day SMA at 1,241. Reliability of this lonely demand can be questioned, while a failure here will keep traders focused on much lower levels circa 1,205/12.Daily chart
The one-hour chart's outlook is pretty much unchanged from Monday. XAU/USD refrains from touching the three-month uptrend at 1,242. At the same time, the negative pressure is coming from the 200-hour moving average line just above 1,250. With the gap between two mentioned technical levels narrowing, the bullion will have to decide, on which side of the equation it should get. From the technical point of view the probability is about 50% for both scenarios, which makes the forecast somewhat more undecided.
Hourly chart
SWFX sentiment is on long way to recovery
Marginally more than 55% of all OANDA clients are now betting the bullion is going to rally, while yesterday the long share was placed under this mark. As for SAXO Bank, here the difference between two types of traders has tightened during the past 24 hours. Nonetheless, the bulls preserve a very unsustainable majority of less than 3% over their bearish peers.