Gold (XAU/USD) Analysis, Price and Charts

  • Gold may break its short-term trading range soon.
  • US real yields turn higher, weighing on gold.

The price of gold is starting to look heavy as it struggles to keep about the supportive trendline started in mid-March. The trend has offered firm support, especially during the mid-August sell-off but now the short-term downtrend is seemingly in control of price action. The two trendlines have met and a breakout is becoming more likely. This mixed to negative outlook is backed up by the latest IGCS retail positioning data.

US real yields remain negative but are starting to slowly pick-up, a negative for the price of gold. While inflation expectations remain steady, US Treasury yields have moved slightly higher narrowing the gap between the two.

Gold (XAUUSD) Price - Pressure on Supportive Trendline Increases as Trading Range Narrows

Gold currently trades just below trend and is eyeing a further move which may bring short-term support between $1,900/oz. and $1,910/oz. into play. While the US dollar has been one of the main drivers of gold recently, the upcoming ECB meeting (Thursday 12:45 UK) and the Euros reaction, may also drive action. The ECB may well opine about further fiscal stimulus in the single-block, weakening the Euro, pushing the value of the US dollar basket (DXY) higher. The Euro makes up around 57% of the basket and a stronger DXY will weigh on the price of gold.

The daily chart shows gold moving towards oversold territory and while this may add a layer of support, the precious metal is now, just, below both the 20- and 50-day moving averages, a negative market signal.

Gold Daily Price Chart (January – September 8, 2020)

Gold (XAUUSD) Price - Pressure on Supportive Trendline Increases as Trading Range Narrows

IG client sentiment data shows 81.61% of traders are net-long with the ratio of traders long to short at 4.44 to 1.The number of traders net-long is 4.86% higher than yesterday and 8.46% higher from last week, while the number of traders net-short is 11.51% higher than yesterday and 6.91% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Gold prices may continue to fall.

Positioning is less net-long than yesterday but more net-long from last week. The combination of current sentiment and recent changes gives us a further mixed Gold trading bias.

What is your view on Gold – are you bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.





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