Never miss a story from David Song

Subscribe to recieve updates on publications
Please enter valid First Name
Please fill out this field.
Please enter valid Last Name
Please fill out this field.
Please enter valid email
Please fill out this field.
Please select a country

I’d like to receive information from Daily FX and IG about trading opportunities and their products and services via email.

Please fill out this field.

Your Forecast Is Headed to Your Inbox

But don't just read our analysis - put it to the rest. Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk.

Your demo is preloaded with £10,000 virtual funds, which you can use to trade over 10,000 live global markets.

We'll email you login details shortly.

Learn More about Your Demo

You are subscribed to David Song

You can manage you subscriptions by following the link in the footer of each email you will receive

An error occurred submitting your form.
Please try again later.

Please add a description for the image.

Fundamental Forecast for Gold: Bearish

Gold Talking Points:

Gold struggles to retain the advance from the 2018-low ($1160) as the U.S. Non-Farm Payrolls (NFP) report sparks a bullish reaction in the dollar, and the current environment keeps the precious metal at risk for further losses as the Federal Reserve appears to be on course to implement higher interest rates over the remainder of the year.

Looking ahead, attention now turns to the U.S. Consumer Price Index (CPI), with the updates anticipated to show the headline reading narrowing to 2.8% from 2.9% in July.

However, stickiness in the core rate of inflation may encourage the Federal Open Market Committee (FOMC) to increase the benchmark interest rate to a fresh threshold of 2.00% to 2.25% on September 26 as the gauge is expected to hold steady at 2.7% per annum in August.

Gold Prices Vulnerable to Sticky U.S Core CPI, Retail Sales

In addition, the Retail Sales report is projected to show another 0.5% expansion during the same period, and a batch of positive developments may fuel bets for four Fed rate-hikes in 2018 as ‘participants generally expected that further gradual increases in the target range for the federal funds rate would be consistent with a sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective over the medium term.

In turn, gold remains vulnerable to further losses as the inverse relationship between the precious metal and the greenback continues to materialize, with the IG Client Sentiment Report still showing retail sentiment near extremes as 82.6% of traders are still net-long bullion.

Gold Prices Vulnerable to Sticky U.S Core CPI, Retail Sales

The ratio of traders long to short sits at 4.74 to 1 asthe number of traders net-long is 2.0% higher than yesterday and 0.8% higher from last week, while the number of traders net-short is 12.0% lower than yesterday and 3.0% higher from last week.

The slant in retail positioning offers a contrarian view to crowd sentiment, with current conditions warning of a further decline in gold as both price and the Relative Strength Index (RSI) snap the bullish formations carried over from the previous month.

Gold Daily Chart

Gold Prices Vulnerable to Sticky U.S Core CPI, Retail Sales

Downside targets are coming back on the radar for gold following the failed attempt to test the August-high ($1225). The lack of momentum to push back above the $1210 (50% retracement) to $1219 (61.8% retracement) area raises the risk for a move back towards 1172 (61.8% retracement) to $1177 (78.6% retracement), but need a break/close below the Fibonacci overlap to bring up the 2018-low ($1160), which sits just above the $1156 (61.8% retracement) hurdle.

For more in-depth analysis, check out the Q3 Forecast for Gold

--- Written by David Song, Currency Analyst

Follow me on Twitter at @DavidJSong.

Additional Trading Resources:

Are you looking to improve your trading approach? Review the ‘Traits of a Successful Trader’ series on how to effectively use leverage along with other best practices that any trader can follow.

Want to know what other currency pairs the DailyFX team is watching? Download and review the Top Trading Opportunities for 2018.

Interested in having a broader discussion on current market themes? Sign up and join DailyFX Currency Analyst David Song LIVE for an opportunity to discuss potential trade setups!

Other Fundamental Forecast:

New Zealand Dollar Forecast - NZD/USD Prices May Fall on Swedish Election and as ECB Sinks Euro

Japanese Yen Forecast - The Japanese Yen Moves into the Tariff Conversation

Oil Forecast – Trade Wars and an Emerging Market Crisis Likely To Keep Oil Volatile

British Pound Forecast – Positive Momentum Will Continue to Drive Sterling Higher