Commodities moved a tad higher in European session as weakness in USD continued to provide supports. Currently trading at 1365, the benchmark contract for gold soared for a third consecutive day. Others in the precious metal complex remained firm with silver rising to 25.055, a new 30-year high, and palladium surging for a 8th straight day to 657.3. While trading below October's high of 1730, platinum gained for a third day to as high as 1722.5. Oil prices also rose with the front-month contract for WTI crude oil price climbing to 82.2.
It's probably one the most important weeks in the US, as well as financial markets. Apart from the FOMC meeting, the midterm election will be held on November 2. Democrats currently control both houses of Congress. However, current polls indicate Republicans are likely to take over the House and that Democrats will maintain control of the Senate by a slim margin. How will this political mix affect financial markets?
Research shows that midterm election has stronger correlation between elections and equities but history told us that USD did rise shortly after elections when Congress changed control: from Democrats to Replicans in 1980, 1984 and 1994. While there may be problems on passing legislations, parties seemed to place significant efforts in managing deficits and boosting economic growth. If history repeats this time, we may see temporary strength in the dollar. Hence, gold (and other commodities) may decline as a result. Yet, as we mentioned, the impact should not affect the long-term uptrend for gold. As economists on the street expect, US economy will remain sluggish for an extended period, thus, increasing the appeal for gold and a safe haven and a store of value.
Concerning economic data, US' ISM manufacturing index probably dipped to 54 in October from 54.4 a month ago. Earlier in the day, China's PMI expanded to 54.7 in October from 53.8 a month ago. This is the fastest growth pace in 6 months and signaled the country's economy can sustain through the government's tightening measures. In the UK, manufacturing PMI unexpectedly rose to 54.9 in October from 53.4 in September. The market has anticipated a drop to 53. The decline in pound, especially against the euro, has helped boost exports. Together with the strong-than-expected GDP growth in 3Q10, the BOE will very likely leave monetary policies unchanged on Thursday.
Nov 2, 2010
New York Session Recap
The dollar firmed ahead of this week's key events - tomorrow's election and Wednesday's FOMC meeting - and amid stronger manufacturing data. US economic data released today was mixed. Personal income for September missed expectations of +0.2% falling to -0.1% from the prior +0.4% (revised down from +0.5%). This was the first negative reading in personal income since July 2009. Personal spending for September came in worse than the anticipated +0.4% with a disappointing print of +0.2% (prior +0.5%) and Core PCE MoM declined to 0.0% (cons. +0.1%, prior +0.1%). The data released later on surprised to the upside as September construction spending gained to +0.5% despite expectations of a -0.5% print and up from the prior -0.2%. This was led by increases in homebuilding. The ISM manufacturing index for October, which was forecast at 54.0 rose to the highest level in 5-months with a print of 56.9 (prior 54.4). EUR/USD was rejected at session highs above 1.4000 and is currently trading around 1.3880.
U.S. equities traded most of the session with a positive tone and experienced a late day slump before bouncing to finish the day marginally higher. The Dow Jones Industrial Average advanced slightly by about +0.06% and the S&P 500 rose about +0.09%. Commodities were mixed with the oil gaining by about +1.62% while the metals slipped. Gold declined by about -0.64% and silver fell roughly -0.52% on as a result of a stronger buck.
Top tier economic data will be released down under with New Zealand 3Q employment data and the RBA rate announcement due out of Australia. October monetary base figures are set for release out of Japan as well as the BOJ Board Meeting minutes from the Oct. 4-5 meeting.
U.S. equities traded most of the session with a positive tone and experienced a late day slump before bouncing to finish the day marginally higher. The Dow Jones Industrial Average advanced slightly by about +0.06% and the S&P 500 rose about +0.09%. Commodities were mixed with the oil gaining by about +1.62% while the metals slipped. Gold declined by about -0.64% and silver fell roughly -0.52% on as a result of a stronger buck.
Top tier economic data will be released down under with New Zealand 3Q employment data and the RBA rate announcement due out of Australia. October monetary base figures are set for release out of Japan as well as the BOJ Board Meeting minutes from the Oct. 4-5 meeting.
Nov 1, 2010
Gold Forecast and Technical analysis
Gold inclined, stabilizing above SMA 20 once more. In the interim, it is still moving below the pivotal level of 1372.00, which represents 200% Fibonacci of CD leg of the suggested bearish harmonic formation. RSI is trending upwards and Stochastic indicates continuation for the upside wave despite entering overbought areas. This contradiction makes our outlook neutral and we recommend watching the price behaviors around the aforesaid Fibonacci level.
The trading range for this week is among the key support at 1300.00 and key resistance now at 1404.00.
The general trend over the short term basis is to the upside, targeting $ 1400.00 per ounce as far as areas of 1120.00 remain
Support 1350.00 1339.00 1330.00 1325.00 1320.00
Resistance 1365.00 1372.00 1380.00 1395.00 1404.00
Recommendation Based on the charts and explanations above our opinion is,
staying aside until a clearer sign appears to pinpoint the upcoming big move.
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