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Gold Talking Points

The recent rebound in the price of gold continues to unravel, with bullion at risk for a further losses as it carves a fresh series of lower highs & lows.

Image of daily change for major currencies

Gold Prices Carve Fresh Bearish Sequence After Posting July-High

Image of daily change for gold prices

The precious metal continue to fall back from the monthly-high ($1266) after stalling at a near-term pivot, with the July-low ($1238) now on the radar as the bearish momentum appears to be gathering pace.

Keep in mind , the monthly opening range suggests a near-term top is in place following the string of failed attempts to close above the $1260 (23.6% expansion) hurdle, and the recent rise in volatility appears to be accompanied by a pickup in long interest as retail sentiment continues to sit at an extreme.

Image of IG Client Sentiment for gold

The IG Client Sentiment Report shows 88.0% of traders are still net-long gold with the ratio of traders long to short at 7.35 to 1. The number of traders net-long is 0.2% higher than yesterday and 5.3% higher from last week, while the number of traders net-short is 13.5% higher than yesterday and 7.6% lower from last week.

The update continues to reinforce a bearish outlook for gold as retail sentiment remains heavily skewed, and the precious metal may stage a more meaningful run at the December-low ($1236) as the Relative Strength Index (RSI) flirts with oversold territory, with a break below 30 likely to be accompanied by a further decline in the price of gold.

Gold Daily Chart

Image of gold daily chart
  • Broader outlook for gold remains tilted to the downside as both price and the Relative Strength Index (RSI) extend the bearish formations from earlier this year, and the precious metal appears to be on its way to test the monthly-low ($1238) as it carves a fresh bearish sequence.
  • A break of the December-low ($1236) raises the risk for a move towards $1210 (50% retracement) to $1219 (61.8% retracement), which sit just above the July 2017-low ($1205), with the next region of interest comes in around $1198 (38.2% expansion).

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

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Additional Trading Resources

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--- Written by David Song, Currency Analyst

Follow me on Twitter at @DavidJSong.