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Gold Price Outlook - Struggling to Break Resistance, Sentiment Remains Negative

Gold Price Outlook - Struggling to Break Resistance, Sentiment Remains Negative

Nick Cawley, Strategist

Gold (XAU/USD) Analysis, Price and Charts

  • 50-day simple moving average continues to thwart the bulls.
  • IG client data reveals bearish set-up.

A short-term move higher in the US dollar has applied pressure back on gold, forcing the precious metal back under $1,900/oz. this week. The greenback has benefitted from a lack of progress on the latest US fiscal package and it is unlikely that an agreement will be reached ahead of the Presidential elections on November 3rd. The US dollar basket (DXY) has also benefitted from a weak Euro, the largest constituent (58%) in the basket, as the single-block continues to struggle with anaemic growth and inflation.

US Dollar Basket (DXY) Daily Price Chart (January – October 14, 2020)

Gold Price Outlook - Struggling to Break Resistance, Sentiment Remains Negative

The daily gold chart shows how the 50-day simple moving average (blue line) has acted as upside resistance since mid-September. We noted last week that gold would have difficulty pushing through the 50-dma and 23.6% Fibonacci confluence around $1,928/oz. and this still remains the case.

Gold (XAU/USD) Price Rattled by Rising US Treasury Yields

Gold is currently toying with the 20-dma and if that breaks then initial support will be found around $1,872/0z. ahead of the late-September double low around $1,848/oz.

Gold Daily Price Chart (February – October 14, 2020)

Gold Price Outlook - Struggling to Break Resistance, Sentiment Remains Negative

IG client sentiment datashows 82.87% of traders are net-long with the ratio of traders long to short at 4.84 to 1. The number of traders net-long is 8.09% higher than yesterday and 8.83% higher from last week, while the number of traders net-short is 26.27% lower than yesterday and 10.28% 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.