Gold Prices Snap Three-Week Losing Streak as Trade War Intensifies

Fundamental Forecast for Gold: Neutral

Gold prices are staid to snap a three-week losing strain with a changed steel inching aloft by scarcely 0.2% to trade during 1255 forward of a New York tighten on Friday. The postpone from a new offered vigour comes alongside a miscarry in broader risk ardour with all 3 vital US equity indices shutting aloft on a week notwithstanding ongoing concerns over a ascent trade fight with China. For gold, a tariff dispute represents a spark of wish for a bulls and a concentration is on either or not cost can follow by on this week’s annulment off support.

Strong Headline NFPs Overshadowed by Weak Wage Growth

US Non-Farm Payrolls (NFP) expelled on Friday surfaced accord estimates with a imitation of 213K for a month of June. Although a title stagnation rate up-ticked to 4% from 3.8%, a pierce was accompanied by enlargement in a Labor Force Participation rate that changed adult to 62.9% from 62.7% a month earlier- a welcomed development. Overshadowing a news however was density in a salary acceleration total with normal hourly gain holding solid during 2.7%- blank expectations for an up-tick.

So what does all this meant for a Fed? We’ve prolonged settled that a executive bank’s primary regard in new years has been a inflationary opinion and with salary expansion still rather subdued, a FOMC is doubtful to dive a normalization routine (interest rate hikes). The markets responded in kind with equities rallying into a tighten of a week on a prospects of a some-more light proceed from a Fed.

Trade War Fears to Offer Gold Support

Heading into subsequent week, traders will be eyeing a recover of a Jun Consumer Price Index (CPI) for nonetheless another refurbish on a broader inflationary conditions. As it pertains to gold, Friday’s recover does small to impact a broader opinion with a categorical concentration for investors fixated on a appearing trade war. While a destiny of this dispute stays uncertain, a risk it presents to near-term financier perspective might play a purpose in alleviating some of a new vigour in bullion prices and a concentration is on this week’s miscarry off long-term support.

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Spot Gold IG Trader Positioning

Gold Trader Sentiment

  • A outline of IG Client Sentiment shows traders are net-long Gold- a ratio stands during +7.48 (88.2% of traders are long) –bearishreading
  • Long positions are 2.3% aloft than yesterday and 10.2% aloft from final week
  • Short positions are 7.6% reduce than yesterday and 7.8% 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 Spot Gold-bearish contrarian trade bias from a perspective standpoint.

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Gold Weekly Price Chart

Gold Weekly Price Chart

In final weekly bullion forecast, we highlighted pivotal support targets at, “the 50% retracement of a late 2016 allege during 1245 corroborated closely by a 200-week relocating normal / trendline support during ~1235.” Gold purebred a low during 1237this week before resilient sharply. So is a low in place?

This is a large support section and nonetheless a broader opinion does sojourn weighted to a downside, a risk is ascent for a incomparable liberation while above these lows. Weekly insurgency stands adult during 1285 where a 61.8% retracement converges on a 50-line with broader bearish cancellation during a yearly open during 1302. A mangle next this pivotal support section risks accelerated waste for bullion with such a unfolding targeting a 61.8% retracement of a late 2016-advance during 1215 and 1204.

Bottom line: Gold has responded to pivotal weekly support and a evident concentration is on a Jun opening range with a broader downtrend during risk while above 1236. 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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