• Tue. Feb 27th, 2024

Gold term in low vol environment

Gold term in low vol environment

Gold Outlook and Analysis

  • ISM services data boosts gold prices ahead of quiet week.
  • Ascendant triangle in focus.

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XAU/USD Fundamental Forecast

Gold prices remained steady this Tuesday morning after yesterday’s rally on the back of the US ISM non-manufacturing PMI miss hitting a new annual low – heading into contraction territory. Since the US is a predominantly service-financed economy, the printing has significantly weakened the US dollar and bullion has turned upside down as a result.

The resulting impact on Fed Funds futures (see table below) was a dour recast of interest rate expectations with a 75% probability of a rate pause next week.

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Federal Reserve Interest Rate Probabilities

Source: Refinitive

Fund flows from the world’s largest physical-backed gold ETF have been falling as economic data weighed on the greenback recently. Traditionally, gold prices move in line with this metric, and with recent negative readings, gold has been limited to the upside.

SPDR GOLD TRUSDT ETF Fund Flows

Source: etf.com

Also, real yields (below) have risen around the 1.5% mark, showing that gold has no real directional bias. Given the more bullish US data this week, I don’t expect much in terms of gold price movement. The Volatility Index (VIX) is also down, which is generally negative for the yellow metal.

US Real Yields

Source: Refinitive

Technical analysis

Introduction to Technical Analysis

Candlestick patterns

Recommended by Warren Venketas

Gold price daily chart

Chart prepared Warren VenkatasI.G

The daily XAU/USD price action managed to hold above its head 1950.00 Psychological handle on long-term trendline support (black). On the defensive side, the Bulls just can’t seem to break through on top 1980.00 -1985.00 The zone (dashed black line) has now formed a short-term ascending triangle pattern. It may take some time before this zone is tested once again – most likely by next week’s FOMC and CPI releases. If the bears push down, the formation will be invalidated 1950.00/ trendline support respectively, a confirmatory candle close.

Defense Levels:

  • 50-Day MA (Yellow)
  • Triangular resistance
  • 1969.34

Support Levels:

  • 1950.00/trendline support
  • 1932.20

IG Client Sentiment: Bullish

The IGCS shows that retail traders are currently diversified long In gold, with 68% of traders who currently hold long positions (as of this writing). At DailyFX we take a contrary view to the general crowd sentiment, but due to recent changes in long and short positioning, we come to a short-term upside bias.

Contact and follow Warrenon Twitter:@WVenketas

DailyFX Provides forex news and technical analysis on trends impacting global currency markets.

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