Gold Price Sell-off Deepens notwithstanding Rising Tariff, Trade War Concerns

Fundamental Forecast for Gold: Neutral

Gold prices are down for a second uninterrupted week with a changed steel off some-more than 0.70% to trade during 1269 forward of a New York tighten on Friday. The decrease comes alongside waste in tellurian equity markets this week as ascent geo-political tensions per a appearing trade fight continue to import on risk appetite. Interestingly, bullion has not served as ‘safe haven’ for traders with prices still underneath vigour after final week’s outward weekly reversal.

Tariffs Stoke Trade War Concerns

The intensification of tongue between China and a U.S. has continued to import on marketplace perspective as investors import a impact of an all-out trade fight between a world’s largest economies. While these concerns would typically be understanding for a yellow metal, expectations for aloft rates and determined strength in a US Dollar have kept prices underneath vigour with bullion violation to uninformed yearly lows this week.

Things have been still on a information front though demeanour for that to change successive week with U.S. Durable Goods Orders and a third and final examination on 1Q GDP on tap. Highlighting a mercantile calendar will be a May examination on Core PCE (personal output expenditure) on Friday. Consensus estimates are job for an uptick in a Fed’s elite inflationary sign to 1.9% y/y. A clever imitation here would expected see traders continue to cost in a fourth rate-hike from a executive bank this year- a unfolding that would import on bullion prices.

As it stands, expectations are for a 25bps travel in Sep with Dec Fed Fund Futures hovering only underneath 50%. That said, there’s room for composition and clever US information will continue to fuel these expectations. Keep in mind that a executive bank will now be holding press conferences during any process assembly and offers cabinet members some-more coherence with honour to a timing of successive hikes. For gold, a concentration is on technical support only reduce and while prices might see a near-term postpone successive week- a broader risk stays weighted to a downside… for now.

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Spot Gold IG Client Positioning

Gold Trader Sentiment

  • A outline of IG Client Sentiment shows traders are net-long Gold- a ratio stands during +5.54 (84.7% of traders are long) –bearishreading
  • Long positions are 4.7% aloft than yesterday and 8.0% aloft from final week
  • Short positions are 4.4% reduce than yesterday and 9.5% reduce from final week
  • We typically take a contrarian perspective to throng sentiment, and a fact traders are net-long suggests Spot Gold prices might continue to fall. Traders are serve net-long than yesterday and final week, and a multiple of stream positioning and new changes gives us a stronger Gold-bearish contrarian trade bias from a perspective standpoint.

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Gold Weekly Price Chart

Gold Weekly Price Chart

Gold prices posted an outward weekly annulment off insurgency off yearly open insurgency progressing this month with a successive decrease now coming a array of parallels that could offer some near-term support. The segment of seductiveness is 1255/60. Keep in mind that weekly movement has depressed to a lowest levels given Jan 2017 and serve highlights a downside risk for bullion.

A mangle subsequent this slope targets a 50% retracement of a late 2016 allege during 1245 corroborated closely by a 200-week relocating normal / trendline support during ~1235. Weekly insurgency stands during 1285 with bearish cancellation solid during a 52-week relocating normal / 2018 open during 1298/1302.

Bottom line: A mangle of a Jun opening range has me looking for a late-month low in price. That said, demeanour for probable liberation successive week to offer some-more auspicious short-entries while subsequent a yearly open. For a finish technical relapse of a near-term Gold cost levels (daily intraday), examination this week’s XAU/USD Technical Outlook.

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—Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michaelon Twitter @MBForex or hit him during mboutros@dailyfx.com

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