Gold (XAU/USD) Analysis, Price, and Chart
- Channel break leaves gold adrift.
- One technical indicator suggests the sell-off may be overextended.
The multi-touch bull channel that has dictated the price of gold recently broke down yesterday as the precious metal fell to a one-month low. Yesterday’s move extended Friday’s sell-off and early price action today suggests that the precious metal may struggle to push meaningfully higher before the two-day FOMC meeting. Ahead of this meeting, US PPI and retail sales data will be released later today, and both prints have the potential to move the US dollar - and gold - in the short-term ahead of the Fed.
The daily gold chart clearly shows this week’s channel breakout. The recent sell-off has pushed the precious metal heavily into oversold territory, suggesting a potential pause in the move, while the 50-day simple moving average (blue line) acted as initial support on Monday. While tomorrow’s Fed announcement will be the main macro-driver for the US dollar and gold, from a technical point of view, gold may nudge back towards the bottom of the recent channel at $1,885/oz due to its oversold set-up. A break below yesterday’s low and the 50-day sma would open the way to $1,825/oz. (200dsma) and $1,808/oz.(May 13 swing low).
Gold Daily Price Chart (November 2020 – June 15, 2021)
| Change in | Longs | Shorts | OI |
| Daily | -1% | 3% | 1% |
| Weekly | 14% | -3% | 6% |
Client sentiment data show 73.45% of traders are net-long with the ratio of traders long to short at 2.77 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.
Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current Gold price trend may soon reverse higher despite the fact traders remain net-long.
What is Market Sentiment and How Does it Work?
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.
