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.

Gold Talking Points

The recent decline in gold appears to be stalling ahead of the July 2017-low ($1207) as the People’s Bank of China (PBoC) takes additional steps to support the economy, but the recent series of lower highs & lows keeps the downside targets on the radar especially as the bearish momentum appears to be gathering pace.

Image of daily change for major financial markets

Gold Price Forecast: Post-NFP Rebound Aligns with Bearish Sequence

Image of daily change for gold prices

Bullion bounces back from a fresh 2018-low ($1204) as China’s central bank adjusts a reserve requirement for financial institutions, with the PBoC specifically targeting trading in FX forwards by removing the 20% ratio, and it seems as though the region will take additional steps to cushion the real economy amid the growing threat of a trade war with the United States.

Keep in mind, current market themes may continue to drag on gold as recent comments from the Federal Reserve suggest the central bank will continue to normalize monetary policy over the coming months, and the hawkish forward-guidance for monetary policy may continue to heighten the appeal of the U.S. dollar as Chairman Jerome Powell & Co. appear to be on track to implement four rate-hikes in 2018.

Image of IG client sentiment

At the same time, the IG Client Sentiment Report shows retail sentiment holds near recent extremes, with 87.6% of traders still net-long the precious metal, with the ratio of traders long to short at 7.06 to 1. The update shows the number of traders net-long is 2.4% lower than yesterday and 0.1% lower from last week, while the number of traders net-short is 0.9% lower than yesterday and 12.2% lower from last week.

The ongoing skew in retail positioning continues to offer a contrarian view to crowd sentiment, with the recent string of lower highs & lows in keeping the downside targets on the radar as both price and the Relative Strength Index (RSI) retain the bearish formations carried over from earlier this year.

Gold Daily Chart

Image of EURUSD daily chart
  • Despite the rebound, gold prices remain at risk for further losses, with failure to hold above the Fibonacci overlap around $1210 (50% retracement) to $1219 (61.8% retracement) raising the risk for fresh 2018 lows as the bearish momentum from earlier this year appears to be reasserting itself.
  • With that said, will keep a close eye on the RSI, with a break of trendline support paired with a break below 30 raising the risk for a further decline in gold prices, with the next downside region of interest coming in around $1198 (38.2% expansion) followed by the overlap around $1172 (61.8% retracement) to $1177 (78.6% retracement).

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

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!

Image of DailyFX economic calendar

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.

--- Written by David Song, Currency Analyst

Follow me on Twitter at @DavidJSong.