Gold Price Eyes $1,910 Resistance as Election Uncertainty Drags on USD
GOLD PRICE OUTLOOK:
- Gold prices ascends alongside a softening US Dollar, eyeing key resistance at US$ 1,910
- Breaking above US$ 1,910 may open room for more upside towards US$ 1,942
- A pullback from here may lead to another harmonic movement back to US$ US$ 1,872
Gold prices fluctuated at a key resistance level at US$ 1,910 after registering a decent gain on Monday. The US Dollar index fell to a two-week low of 93.44, underpinning precious metal prices. President Trump was reported to have been discharged from the hospital, though his health condition was closely scrutinized by market participants.
A falling US Dollar, alongside uncertainties surrounding the US presidential election may continue to serve as positive catalysts in the near term. The medium trend of gold prices, however, remains tilted to the downside as prices have formed consecutive ‘lower highs’ and ‘lower lows’ since early August (chart below).
Technically, gold prices have rebounded from their 100-day SMA (1,884), eyeing a push to key resistance at US$ 1,910 – the 61.8% Fibonacci retracement. A firm breakthrough above U$ 1,910 may open room for further upside towards the next resistance level at US$ 1,942 (50% Fibonacci retracement). A few harmonic swings were observed (chart below), showing a clear downtrend in the past two months. A failure to break above US$ 1,910 may result in another harmonic pullback towards the immediate support levels at US$ 1,872 and then US$ 1,810.
Gold Price – Daily Chart
In the near term, the outlook of gold largely depends on the direction of the US Dollar due to their negative correlation over the past 12 months (chart below). Similarly, silver prices are also trailing behind gold, challenging a resistance level at US$ 24.50.
From a long-term perspective, however, gold prices appeared to have entered a consolidation phase within a mega bull trend, with a major support level at around US$ 1,800. The macro-environment (ultra-low interest rates, QE and fiscal stimulus) remains accommodative to gold prices, albeit a short-term pullback is underway.
Gold Prices vs. US Dollar Index – Past 12 Months
IG Client Sentiment indicates that gold traders are heavily leaning towards the long side, with 74% of positions net long, while 26% net short. As gold prices climbed, retail traders significantly increased their short positions (+35%) overnight and trimmed long (-7%) exposure. Compared to a week ago, traders have added to shorts (+39%) while reducing long (-13%) positions.
--- Written by Margaret Yang, Strategist for DailyFX.com
To contact Margaret, use the Comments section below or @margaretyjy on Twitter
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.