Gold (XAU/USD) Analysis, Price, and Chart
- Inflation, growth, and tapering will all be covered by Fed chair Powell.
- Traders pare back net-longs, increase net-shorts.
Gold has been stuck in a holding pattern for the last few days with recent risk-off/risk-on events prompting very little reaction in the precious metal. This week’s calendar is packed full of potentially market-moving events and releases, but today’s FOMC decision stands head and shoulders above all others. Monetary policy levers are expected to be left untouched, but the post-decision press conference by chair Jerome Powell will steer market sentiment, and direction, for the days and weeks ahead. US growth remains robust – the first look at Q2 US GDP on Thursday is expected to show GDP expanding by 8.6% – while the FOMC will likely reiterate that current inflationary pressures are temporary. Friday’s core PCE release for June is expected to show y/y inflation at 3.7%, up from 3.4% in May. One area that the Fed may change its current language/stance is the bond-buying program, where any talk of trimming back purchases – tapering – will send the US dollar higher, with negative consequences for the price of gold. A slightly more dovish FOMC however would see the greenback slide lower, giving the precious metal a bid.
For all market-moving news and data releases, see the DailyFX Economic Calendar
The daily chart shows that gold has been rangebound over the last week, with support and resistance seen at $1,790/oz. and $1,825/oz. respectively. Volatility has fallen to a near one-year low, while the three moving averages are scrambled, giving no clear direction. With the increased level of US risk over the next three days, the precious metal may soon see a sharp reaction. It may be wise to sit on the sidelines and let this week’s risk events pass before making any trading decision.
Gold Daily Price Chart (September 2020 – July 28, 2021)
Client sentiment data show 80.45% of traders are net-long with the ratio of traders long to short at 4.11 to 1. The number of traders net-long is 7.02% lower than yesterday and 3.24% lower from last week, while the number of traders net-short is 10.12% higher than yesterday and 31.39% 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.
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.
Be the first to comment