Gold (XAU/USD) Outlook:
- Gold prices rise above psychological resistance after Federal Reserve confirms extension of Quantitative Easing
- USD weakness has supported a rebound in the commodity market with Friday’s Non-Farm Payroll (NFP) report as the next major catalyst for price action
Gold’s Bullish Breakout Loses Momentum after Breaking above $1,800
Gold prices rose above critical resistance on Friday, clearing the key psychological level of $1,800 which continues to hold as critical support for the imminent move.
As the Jackson Hole Symposium came to a close, dovish commentary from Fed Chair Jerome Powell boosted the demand for Gold, Silver and other major commodities that hold a reputation as a hedge against inflation which continues to exceed the monetary policy target of 2%.
The shift in risk sentiment allowed Gold prices to clear trendline resistance before bulls ran into the next level of resistance at $1,818, the 50% Fibonacci retracement level of the 2021 move.
Despite rising geopolitical risks and the nearing of the self-imposed deadline of 31st August 2021 for Americans to return from Afghanistan, tensions between America and the Taliban are additional catalysts that may affect Gold prices as the threat of further attacks looms.
The combination of fundamental and geopolitical factors have supported the bullish trajectory with investors now looking towards Friday’s Non-Farm Payroll (NFP) report for further signs of Fed tapering before the next FOMC Meeting which will take place on 22 September 2021.
DailyFX Economic Calendar
Gold (XAU/USD) Price Action
Gold prices currently remain confined by the 50% Fibonacci resistance which continues to hold bulls at bay. With the Commodity Channel Index (CCI) threatening overbought territory, Gold bulls will need to clear $1,820 before testing the August high of $1,840. A break above this level could see prices breakout towards the next big level of $1,900, a level last tested in May.
In the wake of Friday’s NFP report, the immediate support remains at $1,800 which a break below bringing the 50% Fibonacci level of the 2020 move into play at $1,760.
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Chart prepared by Tammy Da Costa using TradingView
Gold (XAU/USD) Sentiment
Gold: At the time of writing, retail trader data shows 67.90% of traders are net-long with the ratio of traders long to short at 2.11 to 1. The number of traders net-long is unchanged than yesterday and 7.95% lower from last week, while the number of traders net-short is unchanged than yesterday and 18.20% 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.
Positioning is less net-long than yesterday but more net-long from last week. The combination of current sentiment and recent changes gives us a further mixed Gold trading bias.
| Change in | Longs | Shorts | OI |
| Daily | -5% | -2% | -4% |
| Weekly | 3% | -10% | -3% |
--- Written by Tammy Da Costa, Analyst for DailyFX.com
Contact and follow Tammy on Twitter: @Tams707
