Gold Prices in Tug-Of-War Between USD Strength and Safe-Haven Demand

Fundamental Forecast for Gold: Neutral

Gold Talking Points:

Gold prices are reduce for a fifth uninterrupted week with a changed steel down 0.3% to trade during 1211 forward of a New York tighten on Friday. The decrease takes cost behind into pivotal support we’ve been tracking for weeks now and comes amid rising geo-political tensions and as broader equity markets flat-lined. Renewed strength in a US Dollar has been incompetent to materially impact bullion as of late with breakwater direct starting to offer some-more suggestive support for a smashed metal. But is it adequate to spin a waves on this large multi-month sell-off?

Gold Bears Weigh Risk of Flight to Safety vs US Dollar Strength

Signs that a US economy stays on plain balance were reinforced on Friday with a Aug US Consumer Price Index (CPI) display a warn uptick in a core rate of acceleration to a balance of 2.4% y/y. Fed Fund futures are still pricing in a 60% possibility for a fourth rate travel in Dec – remember, expectations for highs rates will typically import on bullion prices that have already been hampered by continued strength in a US Dollar.

However with ascent geo-political tensions (the China Trade War, a economic difference with Turkey and a proclamation of increased sanctions on Russia), a moody to reserve might nonetheless offer some support to bullion prices that have plummeted some-more than 11% off a yearly highs. Despite a decrease in price, bullion has managed to reason only above a pivotal concentration in cost and streamer into successive week a concentration stays on a greeting off a new lows.

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Spot Gold IG Client Positioning

Gold Prices in Tug-Of-War Between USD Strength and Safe-Haven DemandGold IG Client Sentiment

  • A outline of IG Client Sentiment shows traders are net-long Gold- a ratio stands during +6.71 (87.0% of traders are long) –bearish reading
  • Long positions are 3.5% aloft than yesterday and 1.1% aloft from final week
  • Short positions are 3.6% reduce than yesterday and 9.2% aloft from final week
  • We typically take a contrarian viewpoint to throng sentiment, and a fact traders are net-long suggests Spot Gold prices might continue to fall. Traders are some-more net-long than yesterday though reduction net-long from final week andthe multiple of stream positioning and new changes gives us a serve churned Spot Gold trade disposition from a view standpoint.

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Gold Weekly Price Chart

Gold Weekly Price Chart

For weeks now we’ve remarkable that, “It’s too unsure to start positioning for a turn, though a hazard of a near-term liberation stays clear while above a reduce 50-line / 2017 Mar low-week tighten during ~1204,with a expectations for, “side-ways–to-lower cost action.” The opinion stays unvaried streamer into successive week as prices continue to reason only above support.

“Note that weekly RSI is probing a mangle into oversold domain and IF prices were to tighten here, a risk would sojourn weighted to a downside streamer into successive week from a movement perspective. That said, demeanour for halt insurgency during 1234/36 where a 200-week relocating normal and a Dec low intersect on a median-line of a extended descending pitchfork formation we’ve been tracking off a 2017 / 2018 highs. A weekly tighten above this threshold would be indispensable to advise that a some-more poignant low is in place. A mangle reduce from here targets successive objectives during a 50-line around ~1190s corroborated closely by a constructional support connection during 1175/80(area of seductiveness for probable depletion / long-entries IF reached).”

Bottom line: “Although a broader risk stays weighted to a downside, bullion prices have responded to a vital support concentration and could offer a near-term postpone to a new offered pressure. The evident concentration streamer into successive week is on a 1204 support pivot.” For a finish technical relapse of a near-term Gold cost levels (daily intraday), examination final week’s XAU/USD Technical Outlook.

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—Written by Michael Boutros, Currency Strategist with DailyFX

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