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Gold Price Analysis: Heavy Sell-Off Continues - $1,204/oz Beckons?

Gold Price Analysis: Heavy Sell-Off Continues - $1,204/oz Beckons?

Nick Cawley, Senior Strategist


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Gold Price News and Analysis

  • Spot gold continues to slump but RSI looking oversold.
  • Retail remain heavily long of the precious metal despite recent falls.

The DailyFX Q3 Gold Forecast is now available to help traders navigate the market.

Gold Price Analysis – Support Continues to be Broken

The price of gold has fallen more than 10% since touching a $1,365/oz. high just over three months ago as the ongoing strength of the US dollar negates the attraction of the precious metal. In addition, the correlation to the Chinese yuan remains strong with the Chinese central bank letting the currency depreciate by over 8% in the past three months in response to US President Trump’s trade tariffs.

Chinese Yuan/USD vs Gold Price Daily Price Chart

(Chart by @ValentinAufrand - @DailyFXFrance using TradingView)

What’s Behind US-China Tariffs Primer

The latest move lower in gold has seen the precious metal take out the December 12 low at $1,236.5/oz. with ease and head towards the next band of support between $1,215.4/oz. (61.8% retracement of the December 2016 – April 2018 move) and the May 9, 2017 low at $1,214.4/oz. Below here, $1,204.9/oz. comes into play ahead of the psychological $1,200/oz. level. The downtrend from the April 2018 high remains in place and will also need to be broken for gold to invalidate its current. bearish tone. The RSI indicator is currently in oversold territory and may act as a short-term buffer.

On the upside, the previously mentioned $1,236.5/oz. now turns into initial resistance ahead of 50% Fibonacci retracement at $1,244/oz.

Gold Spot Price Chart Daily Time Frame (October 2017 – July 19, 2018)

The latest IG Retail Sentiment Indicator shows that traders are nearly 6-1 net-long of the precious metal despite the recent heavy falls and this may act as a brake of further falls.We take a contrarian view to retail sentiment, and the fact traders are net-long suggests spot gold prices should continue to fall. However, recent retail positional changes show traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current spot gold price trend may soon reverse higher despite the fact traders remain net-long

Are you new to Gold or FX trading or are you looking to improve your trading skill sets? We can help you along your journey with a comprehensive range of constantly updated guides and trading tools – they are all Free to Download Here.

We are interested in your opinion on Gold – Please share your thoughts, views or analysis with us using the comments section at the end of the article or you can contact the author via email at or via Twitter @nickcawley1.

--- Written by Nick Cawley, Analyst

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.