- 70% of open positions are short
- Gold needs to breach the resistance trend-line at 1,227 dollars to confirm its bullish intentions
- The lower bound of the emerging symmetrical triangle is at 1,206
- Economic events: US CB Consumer Confidence (Feb), Existing Home Sales (Jan)
US underlying inflation surged to the highest level in more than four years in January, led by increasing rents and medical costs, a sign that price pressures started to build that could allow the Fed to gradually hike interest rates this year. According to the Labor Department, the consumer price index, excluding the volatile food and energy components, increased 0.3% last month. That was the biggest surge since August 2011 and followed a 0.2% rise in December. In the 12 months through January, the core CPI jumped 2.2%, the largest rise since June 2012 and exceeded the 1.9% average annualized increase over the last 10 years. The overall CPI was unchanged last month after slipping 0.1% in December. The CPI increased 1.4% in the 12 months through January, the biggest rise since October 2014, after gaining 0.7% in December.
The Fed hopes to see more widespread price increases taking hold this year, so that central bankers can deliver their promise to gradually hike short-term interest rates. Recent economic and international developments have raised doubts among analysts and even within the US central bank whether rate hikes are still the right decision. Tighter financial market conditions in the wake of a recent sharp stock market sell-off and weakening domestic and global growth have wiped out bets for a March rate increase. The probabilities of rate hikes for the rest of the year are slim.
Bearish data from the US
While morning releases will mostly concern European countries, in the afternoon, the focus will shift to the United States, where confidence of consumers is estimated to deteriorate from 98.1 to 97.0, and the number of residential buildings sold is to decrease from 5.46M in December to 5.32M in January. This could give gold a boost as a result of weaker Dollar.
Gold rebounds from 1,210
Gold managed to find support at 1,210 (monthly R3), which testifies in favour of a rally after the present consolidation is over. In case of a recovery we will look forward to a test of the February high at 1,264 dollars, which is still $50 away from the spot price. The resistance at 1,264 is also strengthened by the weekly R2 and the Bollinger band. If the bulls remain in control after the attack on it, the next objective could be the peak reached early last year, namely the 2015 high at 1,307.Daily chart
The price has provided us with a new confirmation of the symmetrical triangle that is developing in the hourly chart. Considering that the pattern implies continuation of the general trend and that before the mid-February we observed an upward tendency, the outlook is positive. Now we need gold to breach the resistance trend-line at 1,227 dollars in order to confirm its bullish intentions.
Hourly chart
Bears remain in control of SWFX
In the meantime, there are now more bullish market participants at OANDA than 24 hours ago. Yesterday, 56% of positions were long; now, 60% of traders expect to profit from gold's appreciation. At the same time, the sentiment among Saxo Bank traders with respect to the precious metal worsened, being that the number of longs at the Danish bank fell from 58 to 56%.