Analysis, Price, and Chart for Gold (XAU/USD) Gold is having trouble maintaining short-term channel support. Retail traders’ long positions remain strong, but their short ones are shrinking. Gold’s recent recovery is likely to meet new headwinds next week, putting strain on the short-term trend support. Gold has pushed upward after hitting a multi-month bottom at the end of June, forming a short-term uptrend channel, and is currently trading slightly above $1,800/oz. The medium-term channel’s support break, which occurred between the end of March and the middle of June, resulted in a steep sell-off from $1,878/oz. to $1,761/oz., just below the 50% Fibonacci retracement level at $1,764/oz. The recent turbulence in the US Treasury market, where rates have been plunging to multi-month lows, has helped gold. As traders and investors rushed to cover their short positions, the 10-year US Treasury printed at 1.25 percent yesterday before pushing back above 1.30 percent. The US Treasury market will be scrutinized next week when a large number of 3-, 10-, and 30-year Treasurys are offered for sale in the first half of the week. While the short-dated UST should be relatively easy to place, the $38 billion in 10-year notes (Monday) and $24 billion in 30-year bonds (Tuesday) may be a little more difficult. If the market decides to raise yields ahead of these auctions in order to make them more appealing, gold will be weighed down and the price of the precious metal would fall. With the release of the latest US inflation numbers on Tuesday, the sale of longer-dated USTs may encounter more headwinds. While US inflation is projected to moderate – core m/m is expected to be 0.4 percent in June, down from 0.7 percent in May – any move higher could prompt traders to demand higher yields in order to book 30-year USTs. Retail has been reducing down on their short positions over the last week, leaving them strongly long of gold, according to IG trader sentiment (see below). A contrarian view argues that gold may fall in price. See the DailyFX Economic Calendar for all market-moving news and data releases. Daily Gold Price Chart (September 2020 – July 9, 2021) According to client sentiment data, 87.13 percent of traders are net-long, with a long-to-short ratio of 6.77 to 1. The number of traders who are net-long is down 1.20 percent from yesterday and 1.53 percent from last week, while the number of traders who are net-short is down 16.70 percent from yesterday and 10.15 percent from last week. We tend to be contrarians when it comes to crowd sentiment, and the fact that traders are net-long on gold signals that prices will continue to decline. Traders are more net-long today than they were yesterday and last week, and the present sentiment combined with previous movements offers us a greater Gold-bearish contrarian trading bias. Market Sentiment: What Is It and How Does It Work? What’s your take on gold – are you a bull or a bear? You can contact the author on Twitter @nickcawley1 or by the form at the bottom of this article./n
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