SPOT GOLD PRICE – TALKING POINTS
- Gold prices now rest below support at the $1,300 level after sustained downward pressure since topping out mid-February at the $1,345 area, which puts XAUUSD at risk for additional downside
- Markets may continue to overlook gold in the short-term as risk-on sentiment gains momentum on the back of rebounding yields, improving economic data
- New to trading or simply looking to sharpen your strategy? Read up on How to Trade Gold or learn about Trading the Gold to Silver Ratio
Gold appears to have lost some of its luster over the last month and a half with XAUUSD selling off nearly 4 percent since spot prices peaked mid-February. Now, gold sits below technical support at the $1,300 price level which could put the precious metal at risk for further short-term downside.
SPOT GOLD PRICE CHART: DAILY TIME FRAME (AUGUST 15, 2018 TO APRIL 1, 2019)
With spot gold’s latest plunge, prices could extend even lower towards the 38.2 percent Fibonacci retracement line to find support around $1,280. Aside from the bearish technical picture, rebounding yields could further exacerbate gold’s recent weakness.
Gold failed to mirror the anti-risk rally in Treasuries over the second half of March which was largely triggered by the Federal Reserve announcing its latest dovish position and downward revisions to economic growth forecasts. The decline in the US 10-Year Treasury yield from 2.76 percent at the beginning of last month down to 2.36 percent on March 27 – its lowest level since December 18, 2017 – has since rebounded sharply back to 2.49 percent.
Recent manufacturing data out of China and the US could be sparking the latest risk-on rally after both countries showed improvement. Consequently, the latest economic readings may suggest that fears of slowing global growth are overdone which in turn could push yields higher and gold prices lower considering their inverse relationship. That being said, the short-term uptrend line formed by the lows in spot gold on March 7 and March 29 could provide technical support.
SPOT GOLD TRADER CLIENT SENTIMENT
According to spot gold client positioning data from IG, 76.9 percent of traders are net long resulting in a ratio of traders long to short of 3.32 to 1. Despite the dip in XAUUSD from the $1,320 price level, spot gold traders have increased their bullish bias with the number of traders net-long rising 7.5 percent relative to last week.
Whether you are a new or experienced trader, DailyFX has multiple resources available to help you: an indicator for monitoring trader sentiment; quarterly trading forecasts; analytical and educational webinars held daily; trading guides to help you improve trading performance, and even one for those who are new to FX trading.
- Written by Rich Dvorak, Junior Analyst for DailyFX
- Follow @RichDvorakFX on Twitter