Subscribe to RSS

Gold’s next move could be huge, but which direction will it be?

Gold ended last week only marginally lower thanks to Friday’s noticeable bounce which saw the precious metal momentarily surpass the $1100 handle. Friday’s counter-trend move was partly in response to news that the second quarter US Employment Cost Index (ECI) showed a very small rise of 0.2% in wage pressure. Traders responded to the data by booking some profit on their long dollar and short gold positions as the month drew to a close. Nevertheless, the yellow metal still ended the month of July with a huge 6.5% loss, which represented its biggest monthly decline since June 2013 when it had dropped by a whopping 12 per cent.

As the new week begins, the precious metal is finding itself back in the more familiar territory of around $1090. Despite the weaker ECI report on Friday and today’s overall weaker-than-expected US macro numbers, gold traders remain wary of a potential rate hike in as early as September or December.  They argue that the strong recovery in the US labour market, if sustained, may ultimately put upward pressure on wages and in turn on prices in the coming months. In anticipation of this possibility, the Fed may start tightening monetary policy sooner rather than later so as to reduce the risks of overcooking inflation. But at the moment, inflation is running at extremely low levels across the globe which is another reason why gold is not doing that well.  Indeed, the metal is coming under pressure from all angles. Not only has the physical demand from China been weak but optimism among money managers in the paper market is also falling. This is evidenced, for example, by another 8 per cent increase in net short positions in the week to 28 July, according to the CFTC.

With short gold positions being at a fresh record high, the correction potential is also very high now. For gold to stage a noticeable rally, it will first have to climb above the resistance level of $1100 and hold there on a closing basis. This could happen given that the metal has already reached a Fibonacci extension area between $1083 and $1093. As the RSI is also at an oversold level of below 30, this area thus marks a potential exhaustion point for gold. If gold does correct from here, it may go on to ‘fill’ the area of inefficiency that was created as a result of the sell-off last month (highlighted in red). Consequently, gold could rally towards the old broken supports at $1131.5 or $1143.0, levels that could then turn into resistance.

That being said, sentiment is very bearish on gold and it wouldn’t take much to push the price of the yellow metal below the aforementioned Fibonacci exhaustion area on a daily closing basis. If seen, this may give rise to further follow-up technical selling which could see the metal drop viciously towards the next Fibonacci extension level at $1023 (161.8% extension of the XA swing) where it will also meet the extended point D of an AB=CD pattern. Thereafter is the psychologically-important level of $1000 and then the triangle breakdown measured target around $975.00.

So, gold’s next move could be a sharp one once it breaks out of the recent consolidative range. We could see this breakout at some point this week’s as more US labour market indicators are released prior to Friday’s official jobs report, causing the dollar and in turn gold to move sharply.

Figure 1:

gold

Source: FOREX.com.

0 commentsback to post

Add your comment

Nickname:
E-mail:
Website:
Comment:

Other articlesgo to homepage

50% Deposit Bonus and 10 USD Free Bonus – Hirose UK

50% Deposit Bonus and 10 USD Free Bonus – Hirose UK(0)

50% Deposit Bonus Campaign Maximum Bonus Amount is Unlimited for all customers And 10 USD No Deposit Bonus for Binary Options Campaign is available for new clients who open a Binary Option Account. It’s that simple. Link:  $10 Binary No Deposit Bonus Link:  50% Deposit Bonus Campaign Available to: All new traders Ending Date: 31

$2017 Forex No Deposit Exclusive Bonus – FreshForex

$2017 Forex No Deposit Exclusive Bonus – FreshForex(0)

$2017 HotNo Deposit Exclusive Bonus Offer to all new verified customers. The $2017 Forex No Deposit Bonus offers you a unique opportunity to test trading strategies of FreshForex Link:  $2017 Hot No Deposit Bonus offers Available to: All New Traders. Ending Date: 15 January 2017 Bonus Offer: $2017 Forex No Deposit Exclusive Bonus Offer to

100% Bonus Forex and Binary Options- MarketsYes

100% Bonus Forex and Binary Options- MarketsYes(0)

100% Holiday Cheer Deposit Bonus 2016 Forex / CFD and Binary Options to all New Traders. MarketsYes is glad to offer prospective clients for every deposit up to 1000 USD/EUR/GBP a 100% Holiday Cheer Deposit Bonus Link: 100% Holiday Cheer Deposit Bonus 2016 Link:  $25 Free Bonus Forex / CFD & Binary Options Available to:

$10 Binary Options No Deposit Bonus – Hirose UK

$10 Binary Options No Deposit Bonus – Hirose UK(0)

$10 Binary Options Free No Deposit Bonus Campaign is available for new clients who open a Binary Option Account. It’s that simple. Link: $10 Free No Deposit Bonus Link: 50% First Deposit Bonus Available to: All new Binary Option Account Validity Date: 31 December 2017 Bonus Offer: $10 Binary Options Free No Deposit Bonus Campaign

$30 Free Bonus Plus 30% Deposit Bonus – Ayrex

$30 Free Bonus Plus 30% Deposit Bonus – Ayrex(0)

$30 Binary Options No Deposit Bonus to all New activated Clients. Ayrex presents its very first Binary Options No Deposit Bonus for new traders. Sign up to get FREE $30 and turn them into a fully withdrawable $200! This bonus allows you to profit without making an investment and trade binary options risk-free. Link:  $30

$50 Forex No Deposit Bonus Exclusive Offer – FortFS

$50 Forex No Deposit Bonus Exclusive Offer – FortFS(0)

$50 Forex No Deposit Bonus Exclusive Offer to New and Existing Traders. The $50 Forex No Deposit Welcome Bonus can be received within the promotional time period, from 28.11.2016 to 07.12.2016 inclusive. Link:  $50 Forex No Deposit Welcome Bonus Link:  Up to 50% Bonus of Every Deposit Link:  15% Support Margin Bonus Available to: New

$25 Countdown Forex Bonus Promotion 2017 – ForexTime

$25 Countdown Forex Bonus Promotion 2017 – ForexTime(0)

$25 Countdown Forex Bonus Promotion 2017 new and existing will be eligible traders. ForexTime is offering by receive a $25 credit bonus when they make a deposit of $300 into their accounts*. Link:  $25 Countdown Credit Bonus 2017 Link:  Loyalty Cashback Promotions Link:  $4 Cashback back for every lot Ending Date: 31 December 2016 Available

100% US NFP Bonus Promotion December 2016 – Xtrade

100% US NFP Bonus Promotion December 2016 – Xtrade(0)

Up to 100% Deposit Bonus Promotion to All New and Existing Customers. December 2016 US NFP Announcement Deposit NOW $1000 to $5000 and receive 100% bonus! Link:  $50 No Deposit Bonus Promotion Link: 100% Deposit Bonus Promotion Link:  Free Flight Tickets to Madrid Available to: All New and Existing Customers Bonus Ending Date: Valid 01/12

100% Welcome Bonus Plus Risk Free Trade – Trade12

100% Welcome Bonus Plus Risk Free Trade – Trade12(0)

Get 100% Welcome Deposit Bonus and 7-day risk free trade, Boost your trading with a free 100% Welcome Deposit Bonus to your Live Trading Account. Link:  Get 100% Welcome Bonus Link: 50% Exclusive Deposit Bonus Available to: All new clients Ending Date: 31 December 2016 Bonus Offer: Get 100% Welcome Deposit Bonus Plus 7-day risk

Get 25% Credit Bonus on their first Deposit – HYCM

Get 25% Credit Bonus on their first Deposit – HYCM(0)

25% Credit Bonus available on your Deposits. Experience Some of HYCM New Features, Services and Offers Receive 25% Forex trading credit bonus Link:  25% Trading Bonus on your Deposits Ending Date:  31 December 2016 Available to:   New Clients only Bonus Offer: 25% Trading Bonus Available on your deposits to New Clients only. This promotion is

read more

Forex Featured Broker

Contacts and information

ForexDepositNews.com Forex Deposit Bonus, Forex No Deposit Bonus, Forex Live Contest, Forex Demo Contest, Free Forex Bonus Forex Brokers Review and Other All Forex promotions.

ForexDepositNews.com

Social networks

Most popular categories