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Gold (XAUUSD) Price Slumps - Markets Rattled by Sharp Risk-Off Move

Gold (XAUUSD) Price Slumps - Markets Rattled by Sharp Risk-Off Move

Nick Cawley, Strategist

Gold (XAU/USD) Analysis, Price and Chart

  • Gold trades above $1,900/oz. before selling off sharply.
  • Markets under pressure as riskier-assets shunned.
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Gold is swinging around in early Monday trade as risk-markets come under pressure in holiday-thinned trading conditions. The precious metal has been moving higher of late and traded back above $1,900/oz. earlier today before sellers forced the price back down to just above $1,8500/oz. in around 30 minutes. This sell-off came despite a strong risk-off market theme as rising Covid-19 numbers, and mutations, unsettled investors.

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Oil, a recent barometer of risk, fell by around 5% in early turnover while copper also fell by 3%-4%, despite ongoing Chinese buying interest. S&P futures also fell sharply in pre-US trade, registering losses in excess of 2%. The US dollar broke its recent losing streak and rose by around 0.60% to 90.55, its highest level in 10 days.

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On the back of the uptick in the US dollar, gold turned sharply lower today before trimming its losses. The precious metal lost around $40/oz. in 30 minutes mid-morning, hitting a $1,855/oz. low. The daily chart shows gold making a long-legged doji today, which, when combined with an overbought CCI signal and a bearish contrarian IG sentiment suggests that gold may struggle to move higher.

Gold Daily Price Chart (April – December 21, 2020)

Gold (XAUUSD) Price Slumps - Markets Rattled by Sharp Risk-Off Move

IG retail trader data show 80.22% of traders are net-long with the ratio of traders long to short at 4.05 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.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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