- Today only 35% of SWFX traders are betting on gold's advance
- Risks are biased to the downside; a decline below 1,227 should turn attention to 1,205 (monthly PP)
- Daily technical indicators switched from bullish to bearish in just one day
- Economic events to watch over the next 24 hours: Swiss ZEW Survey (Mar); Bundesbank President Weidmann Speaks; US New Home Sales (Feb) and Crude Oil Inventories (Mar 18); FOMC Member Bullard Speaks; New Zealand Trade Balance (Feb)
Gold declined on Wednesday, with the impact of a stronger US Dollar offsetting a slight increase in the precious metal's safe-haven appeal after attacks on Brussels' airport and a rush-hour metro train. News of attacks in Brussels and hawkish comments from Fed's official have both supported the Greenback, whereas a rising US rate path has decreased bullion's investment appeal.
The US manufacturing activity rose slightly in March, underscoring concerns that have been surrounding America's manufacturing sector, hit by a stronger US Dollar and signs of global slowdown, for some time already. Markit's flash manufacturing PMI ticked up to 51.4 in the reported month, up from the final February print of 51.3, but below economists' expectation for the preliminary reading to come in at 51.9. Manufacturers have been struggling with weakening global demand, exacerbated by a strong US Dollar, which hurts domestic producers' competitiveness abroad, coupled with the rout in energy prices that has resulted in decreased spending budgets across the oil patch. While ne business volumes increased in March, the latest rise was only slightly quicker than in February and still weaker than the post-crisis trend. The report earlier in the week showed 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.
British inflation climbed less than expected last month, extending the period the cost of living in the UK has been below the Bank of England's 2% target to 26 months. Prices rose 0.3% from a year earlier, according to the Office for National Statistics. Economists, however, had expected a 0.4% gain in February. Inflation has not been above 0.3% since December 2014 and last hit the central bank's target in December 2013. Most analysts expect inflation to stay around the mark for most of the spring, before gradually moving towards the end of the year to about 1%. The Office for Budget Responsibility now predicts the consumer price index to climb to 0.7% at year-end, compared with 1% estimated earlier. The OBR then predicts inflation to edge higher to an average of 1.6% in 2017. Meanwhile, core inflation, which excludes volatile food and fuel costs, came in line with expectations at 1.2%. A separate report showed UK public sector net borrowing excluding banks rose to 7.1 billion pounds in February, more than expected. Overall in the fiscal year from April through February net borrowing dropped to 70.7 billion pounds. The OBR predicts net borrowing this year to come in at 72.2 billion pounds, slightly less than estimated in November.
Upcoming fundamentals: Fed's hawk Bullard to speak on Bloomberg TV
President of the St. Louis Federal Reserve Bank has always been leaning more towards the hawkish camp of the FOMC committee. Although he has not expressed as strong views on rate increases as his colleagues from Kansas City and Cleveland Fed banks Esther George and Loretta Mester, James Bullard has been consistent in 2015 in calling for rate hikes. Today Bullard is going to speak to journalists from Bloomberg TV at 13:00 GMT. This is probably the most important fundamental and markets-driving event on Wednesday. In addition to that, US new home sales for February are out at 14:00 GMT. Following a great plunge of 9.2% in January, sales are estimated to rebound by 3.2% in February.
Gold to plunge below 1,235 in volatile trading
The bullion's activity is very high this Wednesday morning. Following the bullish failure to push prices anywhere beyond the 1,250 level, today we are seeing a heavy selling pressure. The most immediate support is the two-month uptrend located at 1,235; however, we suspect that formidable bearish sentiment will lead to a testing of the 1,230 area that consists of the weekly S1 and 23.6% Fibonacci retracement of Dec-Mar uptrend. Closure under 1,227 will signify that gold is ready to tackle the 1,205 mark where the monthly pivot point merges with the second weekly demand line.Daily chart
The outlook is quickly deteriorating, based on gold's developments in the one-hour chart. The 200-hour SMA created enough selling momentum in order to kick off a massive decline in prices. Now the only hope is set to be the March 15 low at 1,225.62. In case this level fails to generate sufficient demand, the traders should focus on the 1,205 zone mentioned above.
Hourly chart
SWFX sentiment is on long way to recovery
Bullish traders have also been successful in pushing their market share in both OANDA and SAXO Bank marketplaces. With the former, more than 56.5% of all clients are betting the bullion is going to rally, while SAXO Bank bullish portion soared above 54% from less than 51% yesterday.