gold bulls are waiting for a breakout
- The price of gold is about to break the key level located at $ 1830 USD.
- A breakout of $ 1830 USD opens the risk of a run to $ 1850 USD and $ 1900 USD.
- Gold turns bullish following falling bond yields and a technical breakout.
The price of gold has been impressive in recent sessions and the XAU / USD price has moved closer to $ 1830 USD, although not quite there yet. $ 1830 USD, as illustrated below, is a key technical level on the long-term charts, so it is paramount that the bulls cross the line in the coming week.
Meanwhile, gold is trading at $ 1,824.67 USD and is holding bullish territory, “looking for a breakout,” as analysts at TD Securities say. “Prices are expected to defy the multi-month downtrend from historic highs. Counterintuitively, this comes after a strong non-farm payroll report – but as noted, this data point does little to resolve the inflation debate, nor does it inform the Fed’s reaction function. ”
In this regard, gold extended its recent gains earlier in the week amid stronger investor demand. “The weaker USD, combined with rising inflation expectations, supported the appetite for the precious metal,” analysts at ANZ Bank said.
On Monday, we heard from several Fed officials. Specifically, James Bullard said the central bank may have to end the cut a little earlier to control inflation. However, that hasn’t done much to support the greenback or yields as the market has decided that the Fed is in no rush to raise rates or speed up the cut process. We will have to wait for more data, especially on employment, and the December Fed meeting in this regard will be important. However, according to the New York Fed, US household inflation expectations reached 5.7% in October, which is higher than the market price.
Focus is on US bond yields
In this context, real US rates collapsed, supporting gold prices. “While the breadth of short positions for gold traders is by no means extreme, position sizes are inflated given the number of participants short, making hawks vulnerable to squeeze,” the researchers said. TD Securities analysts.
“It is important to note that the market microstructure still exhibits shallow market depth, which suggests that a tightening in positioning could have a disproportionate impact on gold prices. Additionally, a break north of the multi-month downtrend could help reverse the trend of ETF exits, pushing gold prices even higher. Unfortunately for the bulls, we would expect a recent CTA buying program to have taken its course, suggesting that the algorithmic flow of trend followers will not lend its support. ”
Gold technical analysis
The above is an example of what could come from a breakout above the downward trendline resistance from a monthly perspective as the bulls brace for a run on the psychological level at $ 1900 USD , then $ 2000 USD.
Meanwhile, from a daily perspective, price is testing horizontal resistance for the fourth time it now meets descending trendline resistance near $ 1830 USD. If that breaks, the bulls will look for a run above $ 1850 USD and then beyond.
By Ross J Burland, FXStreet
Ross Burland began his FX career from the City of London in 2001. Originally employed by the FX department of Sucden (UK) Ltd as a Corporate Sales and Junior Dealer (an FSA qualified investment advisor), Ross has eventually executed the institutional FX spot on the market. -Make an office prior to being recruited to join the FX department of Investec Bank on Gresham Street in a client sales / negotiation role, specializing in corporate treasury management and specialist finance.
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