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Gold Price (XAU/USD) Latest - Struggling to Make Further Headway

Gold Price (XAU/USD) Latest - Struggling to Make Further Headway

2020-10-01 09:30:00
Nick Cawley, Strategist
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Gold (XAU/USD) Analysis, Price and Charts

  • Gold’s upside remains blocked.
  • US real yields guide gold lower.
  • IG client sentiment is increasingly bearish.
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The price of gold trades just below $1,900/oz. and is likely to remain there ahead of important US data later in today’s session and tomorrow’s US Labor Report. Today’s US ISM and PCE readings need to be closely watched, while yesterday’s better-than-expected ADP payrolls report may give a hint towards Friday’s NFP release.

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The relationship between gold and US real yields – nominal yields less inflation – remains intact and may give a further clue to gold traders moving forward. The inverse relationship between the two can be seen in September with 10-year real yields starting the month at -1.08% and finishing the month at -0.94%, pushing the price of gold from around $1,990/oz. at the start of the month to a current level of $1,894/oz. The further negative real yields go, the more supportive they are for gold, and vice versa.

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The daily chart highlights the short-term indecision and lack of price movement. After a decent rebound on Monday, the precious metal remains stuck in a $25/$28/oz. trading range, in line with its current $26/oz. ATR. Any rally will meet resistance at $1,916/oz. (20-dma), then $1,928 (23.6% Fibonacci) before $1,943/oz. (50-dma). Support looks reasonably firm around the recent $1,850/oz. area, although a break opens the way to $1,837/oz. (38.2% Fib).

Gold (XAU/USD) Daily Price Chart (March – October 1, 2020)

Gold Price (XAU/USD) Latest - Struggling to Make Further Headway
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IG client sentiment data shows 81.03% of traders are net-long with the ratio of traders long to short at 4.27 to 1. The number of traders net-long is 0.12% lower than yesterday and 4.38% higher from last week, while the number of traders net-short is 7.59% lower than yesterday and 10.83% lower from last week. We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Gold prices may continue to fall.

Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger Gold-bearish contrarian trading bias.

What is your view on Gold – are you bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.

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

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