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Gold Price Analysis: Sell-Off to Continue or Corrective Move Higher?

Gold Price Analysis: Sell-Off to Continue or Corrective Move Higher?

2018-07-24 10:23:00
Justin McQueen, Analyst
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Gold Price Analysis and Talking Points:

  • Gold Price Downtrend intact for now amid USD Lift
  • Record Short Positioning Suggests Potential Corrective Move Higher
  • See our quarterly gold forecastto learn what will drive prices throughout the year!

Gold Continues to Hold Downtrend for now

Gold bears have continued to remain in control, which has largely correlated with the strength in the Dollar, having been supported by a lift in US yields as of late. Alongside this, as long as gold prices stay below $1230, selling interest remains prominent. However, given the recent sell-off the conviction by bearish investors has eased. Nonetheless, a break below the YTD low ($1211.50) and test for $1204 is still on the cards with the USD potentially set to get a boost in the run to the US GDP report, which is touted to be a big beat.

Gold Prices Set for a Corrective Move Higher

According to the latest CFTC data, gold positioning has now switched to net short after speculators slashed over 25k bullish contracts. Consequently, hedge fund short contracts are now sitting at over 26k, which is near the record seen at the back end of 2015. The last time short positioning had reached these extreme levels with gold this oversold, a countermove followed with the price surging $315/oz over a 7-month timeframe.

GOLD PRICE CHART: Daily Time-Frame (April-July 2018)

Gold Price Analysis: Sell-Off to Continue or Corrective Move Higher?

Chart by IG

Gold Technical Levels

S1: $1211 (YTD Low)

S2: $1204 (July 2017 Low)

S3: $1200

R1: $1230

R2: $1236 (Descending trendline from June)

R3: $1260

Although momentum continues to suggest the bias is towards the downside the fact that the RSI is hovering around oversold territory implies that gold prices may see a reprieve from the recent selling.

GOLD TRADING RESOURCES:

--- Written by Justin McQueen, Market Analyst

To contact Justin, email him at Justin.mcqueen@ig.com

Follow Justin on Twitter @JMcQueenFX

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

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