Gold Price Remains Under Pressure and Looks For Guidance
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Gold (XAU/USD) Analysis, Price and Chart
- Gold’s sell-off may continue as support starts to fold.
- IG client sentiment suggests a mixed outlook.
Gold is struggling to reclaim any of yesterday’s sell-off and is treading water ahead of today’s ECB monetary policy decision, a meeting that may have a marked impact on the US dollar basket. ECB president Christine Lagarde is expected to outline measures to weaken monetary policy further and help anchor interest rates at or around zero percent for years to come. The Euro has strengthened of late, helping to weaken the US dollar basket (DXY), and any sell-off in the single currency on the back of the ECB’s actions or commentary, could help underpin the greenback, putting further downside pressure on the precious metal. The ECB is expected to expand the EUR1.35 trillion PEPP by a further EUR500 billion and extend its end date by another six months.
Gold is finding a modicum of support from US real yields which continue to turn further negative this month. 10-year real yields started December at -89 basis points and widened out to -0.96 bps yesterday. The further negative real yields turn, the better for anti-fiat alternative gold.
Gold continues to tread water around $1,835/oz. just below the 38.2% Fibonacci retracement level at $1,836.9/oz. The spot price is also now below the 200-day simple moving average and the 20-day sma, an indicator that has provided support recently. The 20-dsma has also broken below the 200-dsma, a negative sentiment signal. If gold can break and close above these levels, the 50-dsma should again provide resistance, this time around $1,872/oz. Support is seen around $1,800/oz. before the 50% Fibonacci retracement at $1,763/oz., a level that held firm when it was last tested. The CCI indicator is neither overbought nor oversold.
Gold Daily Price Chart (March – December 10, 2020)
G retail trader datashow 79.85% of traders are net-long with the ratio of traders long to short at 3.96 to 1.We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Gold prices may continue to fall.Positioning is more net-long than yesterday but less net-long from last week. The combination of current sentiment and recent changes gives us a further mixed Gold trading bias.
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