Vang SJC

Yesterday (28/12), a day before the data on US consumer confidence is announced, gold price went down. Prices fluctuated in a narrow range between $1,076.62 and $1,066.29/ounce. The price closed at $1,068.98/ounce, falling 0.65% from the opening price of $1,075.44/ounce.

Fundamental analysis

Fundamental analysis

On the threshold of New Year holidays, selling sentiment still covers the market, especially the US and European markets.

The focus of today’s market is the December consumer confidence report, an important indicator of the US economic activity, indicating the level of consumer optimism in an economy through income and the level of people’s spending. Investors expected the indicator to rise from 90.4 to 93.9 due to the increasing demand during big occasions. Positive figures will reinforce the US production and service sector, boosting inflation and growth.

While the market is heading to the end of the year, balancing books made the trading volume of the market become lower and the liquidity decline. Yesterday, the greenbacks fell to one-week low versus the basket of other major currencies. The US dollar index, measuring the strength of the dollar versus other currencies, stopped at 98 points. Dollar decline gradually, making the gold tied to dollar cheaper to buyers, increasing demand for gold and turning greenlight for its price.

US Federal Reserve (Fed) is expected to raise interest rates four times next year. In particular, the market bet there will be certainly two more interest rate hikes. US’s tightening policy is restricting the demand for precious metals and assets that do not make yield. However, when the Federal Open Market Committee (FOMC) decided to raise interest rate for the first time in nearly a decade this month as the global growth regained recovery, Federal Reserve Chairman Janet Yellen emphasized that the increase speed would be low. Furthermore, in short term, inflation is not likely to achieve the target level of 2% as oil price bottomed out, goods produced in the US is difficult to compete in export, Chinese economy growth is sluggish and commodity market operate poorly.

The poor economic data of the US announced last week also failed to meet market expectation. The manufacturing and service manager confidence index are at the lowest point in the past 1 year. Economic growth dropped sharply and the stronger US dollar affected exports. Gloomy economy diminished the possibility Fed raises interest rate in the first quarter of 2016, pulling the greenback value to go down and pushing gold price up.

The outlook of Fed’s gradual interest rate hike in 2016 is also a good signal for gold price.

Oil price movements are facing with dizzying plunging momentum. There are 2 problems to be solved at the same time: oil glut and weak demand. Gold is used to defend the risk of inflation caused by oil, while energy price falls deeper every day, so the gold demand for defense is almost nonexistent.

Oil, plunging dramatically, made gold drop and terminate the high benefit position of gold price.

Gold short position in precious metals trading funds has no sign of declining. Gold held in ETFs declined 1,465.6 MT as of yesterday, according to data compiled by Bloomberg. The amount of gold hit the bottom of February, 2009 on 17 December. In particular, the amount of gold in Gold Trust SPDR, the biggest gold trading fund in the world, dropped 0.18% to 643.46 tons yesterday, approaching 7 year lows.

Overwhelming short position showed that gold was no longer interested by investors.

In China, the world’s largest gold consumer, gold net import recorded the second consecutive decline in November while investors waited for the US interest rate hike. Gold import fell from 68.2 tons in October to 66.8 tons.

However, China is about to enter the Lunar New Year, the most appropriate time to buy gold. According to figures from the World Gold Council, the demand for precious metals in China often peaks in the first quarter of the new year.

In India, the second largest gold consuming country in the world, the demand is showing signs of recovery. Imports may increase as the global precious metal prices are low. Demand for gold in India generally peaks in the last 3 months, because people often buy gold as a gift on the Diwali festival and wedding season.

Technical analysis

Technical analysis

Currently, at 16:30 GMT +7, gold is trading at $ 1,072.07/ounce, rising 0.37% compared with the opening price of $1,068.54 /ounce.

From chart H1, at the beginning of the Asian session, the long candlestick with almost no shadow shows a strong buying power. The price approaches resistance 50.0 at $1,073.50 but does not break this resistance, then turns down in two consecutive candles. Currently, the candle is bearish, reaching resistance 61.8 at $ 1,072.07/ounce. At the end of the European session and the beginning of the US session, the price will fall to resistance 100.00 at $ 1,066.90 clearance/ounce.

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Sentiment analysis

Sentiment analysis

The market today will be affected by the data on consumer confidence about to be published. Expectations about the greenbacks’ strength after the data release may lead the market to USD long position, temporarily leaving precious metal.

From chart H1 in the technical analysis, there are 5 bearish candles and 5 bullish ones. That the average body of bearish candles is shorter than the average body of bullish ones shows that buying power is stronger than selling power. The price drops sharply in the last hours of trading, indicating that the market has determined the movements of gold price in short-term while waiting for US important economic data. Interest rate hike expectation puts pressure on the overall market sentiment.



According to Bloomberg survey, 17 of 28 traders expect gold price to rise in 2016. Jordan Eliseo, chief economist at the Australian Bullion Co., Sydney also said that gold price will rise sharply in 2016. In addition, QE trend will continue next year. Inflation in emerging markets such as China, Malaysia is still a concern. Besides, gold will be used as a “shield” to the currency devaluation caused by inflation. Also, after a long period investing in dollars, investment funds are possibly selling dollars to balance the portfolio, putting pressure on the greenbacks and pushing precious metals to increase.

The US consumer confidence index announced tonight may increase. However, if the increase is slight, the expectation that the economy could not completely recover may hamper the speed of Fed rate hike, at least in the first quarter of 2016, putting pressure on the greenbacks and push precious metal price to go up.

Market commentary

Today, gold may continue to decline if the US consumer confidence index is strengthened. The decision of Fed to raise interest rate next year can become a reality if US economic indicators record steady growth. The dollar will strengthen as investors bought the greenbacks to gain higher interest rate. Gold owners are not earning interest, thus, gold becomes less attractive and under declining pressure. It may fall down to $1.060/ounce. Gold selling sentiment to gain profit in the threshold of the new year also pushes demand for gold down.


Analysises of Group IF24h

Linh Nhan