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Gold Technical Outlook: Short-Term Range Remains in Place Ahead of The Fed

Gold Technical Outlook: Short-Term Range Remains in Place Ahead of The Fed

Nick Cawley, Senior Strategist


What's on this page

Gold Price, Chart, and Analysis

  • Tapering is fully expected but will the Fed provide a hawkish twist?
  • Fibonacci support and resistance are in place for now.

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The Federal Reserve is fully expected to begin reining in its $120 billion a month bond-buying program imminently, ending an era of ultra-loose monetary policy. The tapering program is expected to begin this month and, depending on the rate and flexibility announced, end in mid-2022. While the market has already priced tapering in, it is the rate at which the central bank reduces the number of bonds that it buys every month that will be key. The US dollar (DXY) is currently trading on either side of 94, just below its recent one-year high of 94.55, ahead of the Fed’s announcement.

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Gold continues to be attracted to the 50% Fibonacci retracement level at $1,763.5/oz. with recent sell-offs being reined back quickly. The trend channel off the recent double low around $1,721/oz. has given traders an opportunity to benefit from positive price action, but with this now broken, and with the current spot price entangled with all three simple moving averages, the outlook for gold looks increasingly unclear. A hawkish turn by the Fed today will likely see the 50% Fib level retested, while a more dovish outlook will see the October 22 high at $1,813/oz. the first upside target, before the 38.2% Fib retracement at $1,837/oz. This level has held over the past four months. While retail traders remain net-long of the precious metal – see below – the number of net-short positions has increased sharply over the last week, giving gold a further mixed outlook.

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Gold (XAU/USD) Daily Price November 3, 2021

Retail trader data show 71.97% of traders are net-long with the ratio of traders long to short at 2.57 to 1.The number of traders net-long is 1.75% higher than yesterday and 3.37% lower from last week, while the number of traders net-short is 7.80% lower than yesterday and 31.30% higher 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 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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What is your view on Gold – 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.