Gold, US Dollar (USD) Talking Points:
Gold and the US Dollar go to war – Fed meeting nears
Despite a rise in geopolitical tensions and a slightly weaker US Dollar, gains have been relatively limited as investors anticipate next week’s Fed meeting. Whilst hawkish commentary from the Federal Reserve has allowed investors to price in the expectations of rate hikes in March, any surprises and additional event risk could push the safe-haven metal out of its recent range.
Although inflationary pressures and the spread of the Omicron variant has allowed the safe-haven metal to stabilize above the $1,800 handle, the economic calendar will likely continue to provide an additional catalyst for price action for both the short and medium-term move.
Gold Price Analysis
At the time of writing, Gold prices are trading below a key level of resistance of around $1,830, the 38.2% Fibonacci retracement of the 2020 – 2021 move. Although the downward trajectory currently remains intact, bulls have managed to drive prices above the 50 period SMA (moving average) providing support at $1,806.
While fundamental factors remain prime catalysts for risk sentiment, the above-mentioned levels have formed a zone of confluency between these support and resistance levels as the CCI (Commodity Channel Index) falls back into range.
Gold (XAU/USD) Daily Chart
Chart prepared by Tammy Da Costa using TradingView
Gold (XAU/USD) Sentiment
Gold: At the time of writing, retail trader data shows 68.30% of traders are net-long with the ratio of traders long to short at 2.15 to 1. The number of traders net-long is 4.81% higher than yesterday and 15.88% lower from last week, while the number of traders net-short is 11.76% higher than yesterday and 0.75% 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.
— Written by Tammy Da Costa, Analyst for DailyFX.com
Contact and follow Tammy on Twitter: @Tams707