- Almost 60% of SWFX market participants are sceptical with respect to gold
- As long as prices keep hovering above 1,223 (March lows), technical outlook is well-positioned for rally
- Daily technical indicators are looking for sideways development on Monday
- Economic events to watch over the next 24 hours: Euro zone GDP (Q4); BOE Governor Carney Testifies on Brexit; Canadian Housing Starts (Feb) and Building Permits (Jan); MPC Member Weale Speaks
Gold rose to trade near a 13-month high on Tuesday, supported by a faltering US Dollar and hopes the Fed will refrain from hiking interest rates as soon as next week. Holdings of SPDR Gold Trust, the world's biggest gold-backed exchange-traded fund, declined slightly on Friday, but remained near the highest level since September 2014 at 25.5 million ounces. While Fed Governor Lael Brainard insisted on patience in hiking interest rates, Fed Vice Chair Stanley Fischer said that inflation is likely to pick up soon, a key condition for further interest rate increases.
China's trade plummeted in February amid sluggish global demand and a business shutdown during the Lunar New Year holiday. China's exports registered the biggest decline in more than five years, plunging 25.4% in dollar-terms year-over-year, compared with the decrease of 11.2% in January. The figure appeared to be much worse than a median forecast for a 15% drop. Imports also slid, dropping 13.8% last month, following the 18.8% decline in January. As a result, China's trade surplus shrank in February from $32.59 billion from $63.29 billion in January. The trade data deepens concerns about the health of the world's second biggest economy. China's economic growth slowed to a 25-year low of 6.9% in 2015, debt has ballooned, while capital outflows have accelerated. China's leaders set an economic growth target of 6.5% to 7% for 2016, compared with 6.9% last year. As part of efforts to boost activity, policy makers have proposed increasing the 2016 fiscal deficit to 3% of gross domestic product, from 2015's budgeted 2.3%. Analysts also expect further cuts this year in interest rates and reductions in the amount of money that banks must hold in reserve, extending a year-long stimulus blitz. Last week China's central bank cut the RRR for banks in a bid to free up surplus cash in the banking system and underpin lending.
Japan's economy slowed less than initially thought in the last quarter of 2015, though the country remains on the brick of falling into another recession despite Prime Minister Shinzo Abe's attempts to underpin growth. Revised data for gross domestic product showed the world's third biggest economy shrank at an annualized pace of 1.1% in the December quarter from the previous three-month period, compared with the initial estimate of a 1.4% contraction. Private consumption was the main drag on Japan's economy in the reported period, dropping a revised 3.4% on an annualized basis, from an originally estimated 3.3%. However, growth in business investment was revised up to an annualized gain of 6.3%, compared with the 5.7% increase initially reported. For the whole of 2015, the Japanese economy came to a revised 0.5% from an initially estimated 0.4%. The moribund economic backdrop will keep the Bank of Japan under pressure to further expand monetary stimulus. However, policy makers may refrain from bold measures when they meet next week for a rate review, after introducing negative interest rates in January. Moreover, weak growth could boost market speculation that Abe may postpone a second consumption tax hike to 8% from 8% scheduled in April next year.
Upcoming fundamentals: Carney to speak on Brexit in Parliament
The only fundamental event that is worth mentioning today is closely connected with monetary policy. At 9:15 GMT the Bank of England's Governor Mark Carney will testify in the Parliament about consequences for British economy and rate-setting policy's future in the event of Brexit, i.e. Britain leaving the European Union after the referendum set to take place on June 23. There are broad expectations the regulator will be forced to ease policy stance in case of such an outcome in order to mitigate any potential economic shocks to the British economy.
Gold inches higher in silent trading
Monday has been a broadly calm day for global markets and the safe-haven metal booked somewhat muted volatility readings. Alongside, trading volume decreased to the lowest level in three working days. Notwithstanding current silence, the broad outlook for gold remains optimistic for the moment. XAU/USD is hovering above the weekly pivot point (1,251) and is expected to pick up in the direction of the first weekly resistance (1,287) soon. To expose the 2015 high at 1,307 the bullion should surge above the monthly R1 placed at 1,295.Daily chart
The one-hour chart is still assuming a leg down will happen in the foreseeable future. The uptrend, which is containing the gains of the yellow metal, is located near 1,285 at the moment. The correction may extend below 1,250 and will be forecasted to approach the 200-hour SMA at 1,244. In case the moving average fails to provide sufficient demand for gold, another support is offered by the February upward-sloping trend-line at 1,233.
Hourly chart
SWFX sentiment is bearish in almost 60% of all cases
On a daily basis from Monday until Tuesday we have observed only marginal changes in the sentiment of OANDA and SAXO Bank markets. The former's clients are bullish on the safe-haven metal in 56% of all cases, the same percentage as yesterday morning. As for SAXO Bank, there exists just a two pp positive gap between the long and short market participants.