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Gold Price Analysis: Chinese Yuan and Gold Remain in Lockstep

Gold Price Analysis: Chinese Yuan and Gold Remain in Lockstep

Nick Cawley, Senior Strategist


What's on this page

Gold Price News and Analysis

  • Spot gold continues to slump as USDCNH drives the move.
  • Gold support at $1,204 may hold.

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

Gold Price Analysis – Chinese Yuan Weakness Continues to Hurt Gold Bulls

The price of gold has fallen nearly $150/oz. since touching a $1,365/oz. high just over three months ago as tightening US monetary policy and a weak offshore Chinese Yuan continue to hurt bullish gold investors. The CNH-gold correlation remains tight and is unlikely to be broken in the short-term, especially with tighter US monetary policy weighing on both asset classes. The Chinese Yuan is around 9% lower since US President Donald Trump ramped up trade tariff rhetoric, negating the overall effect of Trump’s tariffs on the Chinese economy. The ongoing US-China trade war will continue to be a driving force for both the Chinese Yuan and gold.

Special Report: US-China Trade War Enters New Phase amid Yuan Depreciation.

Gold Remains Stuck in a Technical Downtrend

We have noted before that gold is stuck in a downtrend started on April 11 when the precious metal traded at a high of $1,365/oz. The next level of support remains at $1,204/oz. and is likely to hold in the short-term and this roughly coincides with the politically sensitive USDCNH level of 7.00. USDCNH currently trades at 6.8400. If USDCNH holds below 7.00, gold may get a short-term boost, something that would please gold investors who remain overwhelmingly long of XAU.

Spot Gold (XAU) Daily Price Chart (February 2017 – July 31, 2018)

The latest IG Retail Sentiment Indicator shows that traders are 87% net-long of the precious metal, a bearish contrarian sentiment indicator.

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.