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Gold Price Currently Lacks Any Meaningful Conviction, Volatility Lies Elsewhere

Gold Price Currently Lacks Any Meaningful Conviction, Volatility Lies Elsewhere

Nick Cawley, Senior Strategist


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

  • Gold traders are watching from the sidelines as other risk assets dominate trade.
  • ‘Encouraging’ news on Omicron lures risk-on buyers.
  • Retail traders have increased their net-short positions.

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The latest data on Omicron suggest is not as dangerous as the delta covid-19 variant, according to White House chief medical advise Dr. Anthony Fauci. According to Dr. Fauci, the preliminary data is ‘encouraging’ although more data is needed to validate this view. With risk markets now fully focused on covid data once more, this news has led to a surge of interest in risk assets over the last two days, with price action today particularly strong. Global indices are running higher, while the VIX fear index has dropped sharply from last Friday’s 10-month high.

Oil prices remain volatile, with Brent crude over 2% higher on the session so far, adding to Monday’s 5% gains, while Bitcoin has recovered around 60% of the weekend’s sharp sell-off and is trading back above $51k.

Brent Crude Four-Hour Chart – December 7, 2021

Bitcoin Four-Hour Chart – December 7, 2021

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While volatility in these, and a range of other markets, continues to draw traders’ attention, gold has been quiet of late with limited price action seen over the last few days. This is unlikely to change until the end of the week when the latest US inflation figures are released at 13:30 GMT. These are expected to show that inflation has risen further, eclipsing last month’s 30-year high print of 6.2%.

The four-hour gold chart shows the lack of price movement of late with the price stuck between the 20- and 50-day simple moving averages since late Friday. If this short-term support breaks, the 50% Fibonacci retracement level is situated at $1,763.5/oz. and comes back into play again. Below here is $1,722/oz. Any push higher should run out of steam between $1,809/oz. and $1,815.5/oz.

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Gold (XAU/USD) Daily Price December 7, 2021

Retail trader data show 79.44% of traders are net-long with the ratio of traders long to short at 3.86 to 1. The number of traders net-long is 2.37% higher than yesterday and 3.87% lower from last week, while the number of traders net-short is 8.39% higher than yesterday and 23.75% 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. 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.

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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.