- 70% of all SWFX open positions are bearish
- Prices dropped to the 1.280 level
- Gold had surged for six consecutive trading sessions
- Economic events to watch over the next 24 hours: US Housing Starts (May); US Building Permits (May); Baker Hughes US Rig Count Change Crude Oil (June 17)
US Federal Reserve was forced to keep the target range for the Federal Funds rate flat at 0.25-0.50% after its June 14-15 meeting, owing to continuous risks to economic outlook and stagnating inflation expectations. Domestic data has been uneven recently, with mild payrolls report considered to be the key trigger for accepting the status-quo. All member of the Federal Open Market Committee (FOMC) voted for the decision, with Kansas City Fed President Esther George abandoning her hawkish call to raise the benchmark by 25 basis points. Janet Yellen, the Chair, agreed that there are some downside forces to interest rates that may be longlasting. On the short-term basis, she admitted that the upcoming UK referendum on EU membership has weighed on the Fed's decision to postpone the upward revision to the Fed Funds target range. The famous dot plot, which reveals individual members' perceptions of how interest rates are going to evolve in the future, showed that participants continue eyeing two interest rate hikes in 2016 and three in 2017. The terminal rate for the long run has shifted down to 3% from 3.3% in the March projection. The Fed estimates a 2% GDP growth every year during 2016-2018, also reflecting a moderate downward change in the outlook. Consumer prices, measured by the PCE Index, however, are forecasted to increase 1.4% this year. This indicates to an improvement from 1.2% seen three months ago.
The US consumer prices softened in the previous month, but still posted increases in housing and healthcare costs thus supporting inflation, which could still allow Federal Reserve to raise interest rates during the current year. According to the Labour Department release made on Thursday, consumer price index advanced 0.2% in May after rising 0.4% in April. Meanwhile, on a yearly pace, the CPI added 1.0% after accelerating 1.1% in April. Economists, in turn, predicted the CPI to gain 0.3% last month and advance 1.1% from a year ago. The overall increase in consumer prices could be explained by higher gasoline prices as well as rising rents. The so-called core CPI, which do not include food and energy costs, in turn, went up 0.2% in line with April data. That took the year-on-year core CPI rise to 2.2% from 2.1% in April. In the meantime, another report released in the same day posted an advance in the number of Americans applying for unemployment benefits last week. Moreover, the trend remains to be consistent implying a healthy labour market. The following data came a day after the Fed lowered its assessment of the jobs market and suggested a lower probability of interest rate hikes. The Fed has a 2% inflation target and tracks an inflation measure which is currently at 1.6%.
Upcoming fundamentals: US housing construction and oil rig count
Most data concerning gold is again coming out from the US today, as the US Dollar strength sets the tone for the yellow metal. First traders should concentrate on the US Housing Starts data and the number of new building permits at 12:30 GMT, as increased construction numbers might indicate at the strengthening of the US economy. Secondly, commodity traders will watch the Baker Hughes US Rig Count Crude Oil data, and especially important is the change of the operating rig count, as it shows whether crude oil production has increased or declined in the US.
Gold stops its surge on Thursday
Daily chart: The Yellow metal had surged for six consecutive trading sessions before it finally overheated and dropped. Amidst the Thursday's trading session, the metal climbed even above the level of 1,315, and the situation looked like it is about to reach the 1,330 mark. However, the commodity tumbled afterwards, fell below the monthly R1 at 1,278.62 and ended day's trading session at 1,276.85. Although at the start of Friday's session the bullion is on the rise again, and it has surged to 1,284. In addition the aggregate technical indicators predict a surge for the metal today and during the next week.Daily chart
Hourly chart: The hourly chart shows that gold in one of its bounce offs of the upper Bollinger band suddenly started falling below most provided supports. Without any struggling the metal dropped trough the weekly R2, May high level, 20-hour SMA. Afterwards the commodity did find some support in the four support cluster made up of 55 and 100-hour SMA, weekly R1 and lower Bollinger band around the level of 1,287. However, it broke through them after a three hour struggle. The downfall was finally stopped by the monthly R1 at 1,276.62, and the metal has been slowly gaining strength, as it approaches the before passed cluster.
Hourly chart
SWFX traders still largely bearish on Friday
Meanwhile, OANDA Bank clients are bullish with respect to the bullion, precisely in 55.82%. However, SAXO bank clients have shifted again to the bullish side with 51.87% of open positions being long.