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Gold Price Analysis: Continued Short-Term Weakness Likely

Gold Price Analysis: Continued Short-Term Weakness Likely

Nick Cawley, Senior Strategist
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Gold Price, News and Analysis

  • Speculators remain short of gold as prices move lower.
  • Strong US economic data continues to weigh on gold.

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

Gold’s Path of Least Resistance is Lower

A combination of strong US economic data, negative speculative sentiment and a weak chart set-up, points to further short-term losses in the gold space. US 2-year government bond yields are a fraction away from their decade high, adding to their allure, with two more 0.25% US interest rate hikes expected in 2018, bring the total to four. Non-interest-bearing gold suffers in a high-interest rate environment. Yesterday’s strong ISM manufacturing data provided the dollar with a further uplift ahead of Friday’s monthly NFP report which is also expected to confirm the strength of the US economy.

The US dollar is also benefitting from the latest round of US China trade tensions and Emerging Market turmoil as the Turkish Lira, South African Rand and Argentinian Peso all continue to fall heavily. The US dollar remains the de-facto safe-haven in times of EM distress.

The latest CFTC Commitment of Trader Report shows that while large speculators covered a few contracts last week, they remain short of gold for the first time since 2002. Retail speculators also remain net-short gold (see IG Client Sentiment below). And speculators continue to build their US dollar long positions ahead of further interest rate hikes.

Gold Price Analysis: Short-Term Uptrend Under Threat

The technical set-up for gold remains weak in the short-term with the precious metal currently below the 20-day moving average at $1,195/oz. The week-long downtrend from the recent $1,214/oz. high remains intact, while gold also has another upside obstacle, the 50-day ma, at $1,212/oz. The January 2017 swing-low at $1,180/oz. is clearly in view ahead of the recent near two-year low at $1,160/oz.

Gold Daily Price Chart (January – September 5, 2018)

The latest IG Retail Sentiment Indicator shows that traders remain 82.3% net-long of the precious metal, normallya bearish contrarian sentiment indicator. However recent changes in client sentiment suggest that prices may soon reverse higher.

Are you new to Gold trading or are you looking to improve your trading skill sets? We have recently produced an in-depth primer on How to Trade Gold: Top Gold Trading Strategies and Tips.

We are interested in your opinion and trading strategies for Gold, the US dollar and offshore Chinese Yuan – You canshare 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.