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Gold Price Outlook: Struggling to Break Higher Despite Renewed Risk-Off Sentiment

Gold Price Outlook: Struggling to Break Higher Despite Renewed Risk-Off Sentiment

Nick Cawley, Senior Strategist

Gold Price (XAU/USD), Chart, and Analysis

  • Gold below $1,800/oz. while US 10-year bond yield falls further.
  • Existing vaccines may struggle to contain Omicron says Moderna CEO.
  • Traders increase net-longs, reduce net-shorts.

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Moderna CEO Stephane Bancel rattled the markets late in the Asia session by warning that the current crop of Covid-19 vaccines may be less effective at controlling the Omicron variant and that a new vaccine may take many months to modify before it can be released. This warning turned markets risk-off again and wiped out most, or all of Tuesday’s relief rally with oil and equities taking the biggest hit.

Against this backdrop, gold should shine due to the long-held view that the precious metal is a risk-off asset. Yet the precious metals’ performance over the last few days has been lackluster at best. In contrast, the 10-year US Treasury, a benchmark risk-off asset, has rallied sharply sending its yield tumbling by 10 basis points to just above 1.42%. The yield on the UST 10-year was quoted at 1.675% one week ago.

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With gold’s risk-off status under question, at least in the short-term, the price of the precious metal may struggle to move higher, despite looking oversold. A cluster of prior lows just above $1,778 should act as initial support before the 50% Fibonacci retracement level at $1,763.5/oz. comes back into play again. Below here is $1,722/oz.

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Gold (XAU/USD) Daily Price November 30, 2021

Retail trader data show83.26% of traders are net-long with the ratio of traders long to short at 4.97 to 1. The number of traders net-long is 5.10% higher than yesterday and 7.61% higher from last week, while the number of traders net-short is 8.66% lower than yesterday and 22.32% 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.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.

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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.