XAU/USD PRICE FORECAST:
- Gold (XAU/USD) Bounces because the DXY Faces a Key Resistance Hurdle.
- The Higher Rates for Longer Narrative is Likely to Weigh on the Precious Metal Moving Forward as Fed Projections Price in Only 50bps of Cuts in 2024, Down from 100bps in June.
- IG Client Sentiment Shows that Retail Traders are Overwhelmingly Long on Gold with 74% Holding Long Positions.
- To Learn More About Price Action, Chart Patterns and Moving Averages, Check out the DailyFX Education Section.
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Gold prolonged its losses within the European session earlier than a rebound because the US session gathers steam. The Dollar Index and US treasury yields had saved Gold costs beneath stress following the hawkish message from Fed Chair Jerome Powell yesterday.
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FED PROJECTIONS AND DOLLAR INDEX
The US Federal Reserve actually didn’t disappoint on the concept of a ‘hawkish’ pause with the changes to the dot plot particularly elevating eyebrows. The Fed adjusted the 2024 projections which in June indicated 100bps of cuts by 2024, this now exhibits simply 50bps of cuts for subsequent 12 months. The Fed Chair was fast to level out nevertheless that the projections should not a plan and could also be adjusted as wanted.
The DXY for its half rallied sharply increased closing the day with a hammer candlestick on the day by day chart whereas US Treasury Yields rose as soon as extra additional weighing on Gold costs. US knowledge launched early within the US session got here in largely constructive and but we’re seeing a retreat from the Dollar index from a key space of resistance.
Dollar Index (DXY) Daily Chart
Source: TradingView, Created by Zain Vawda
Looking on the day by day chart above and we are able to see the spike above the important thing resistance space round 105.63 earlier than pulling again to commerce at 105.30 on the time of writing. The day by day candle at this stage is on the right track for a capturing star candle shut which might trace at additional draw back. As talked about beforehand nevertheless, the theme of 2023 has been a scarcity of conviction and the technical of the DXY are indicative of that.
The MAs are about to cross on the day by day timeframe (100 and 200-day MAs) which might be a golden cross sample which often signifies bullish momentum and attainable continuation. Now this might nonetheless happen however is in direct contradiction to the worth motion image mentioned above hinting at a deeper retracement. What does this imply? In my thoughts for now it seems we nonetheless lack a little bit of readability relating to longer-term strikes and a shorter-term outlook possibly extra enticing within the present local weather.
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RISK EVENTS AHEAD
The majority of the key threat occasions for the week at the moment are out of the way in which, a minimum of the place the US Dollar is anxious. We do have the S&P Global PMI knowledge due tomorrow and a few Fedspeak which might be adopted up by some US knowledge subsequent week. None nevertheless anticipated to be main market shifting releases and will simply present some short-term spikes relying on the character of the discharge.
For all market-moving financial releases and occasions, see the DailyFX Calendar
GOLD TECHNICAL OUTLOOK
Form a technical perspective, Gold costs loved a constructive week heading into the FOMC assembly following a breakout of the interior descending trendline final week. The rally gathered tempo within the early a part of the week because the DXY stalled forward of the Fed determination. The valuable metallic rallied right into a key confluence zone yesterday across the $1945 deal with which coincided with the Fed price determination, earlier than starting its deep pullback
The pullback has gathered tempo at present with Gold breaking again beneath the 50 and presently buying and selling beneath the 200-day MA resting on the $1924 mark. Having printed a decrease excessive yesterday value motion is hinting at a renewed push beneath the $1900 mark which might face some shopping for stress across the psychological stage. Below the $1900 mark although and the subsequent key space of help is across the latest lows of $1886/oz.
As talked about, although we proceed to see ever altering sentiment and a scarcity of observe by from markets and this might very effectively proceed into tomorrow and subsequent week. With that in thoughts i’d warning in opposition to marrying a bias at this stage as a big beat or miss on any upcoming knowledge might end in short-term volatility and hindering any long-term directional bias.
Gold (XAU/USD) Daily Chart – September 21, 2023
Source: TradingView, Chart Prepared by Zain Vawda
IG CLIENT SENTIMENT
Taking a fast have a look at the IG Client Sentiment, Retail Traders are Overwhelmingly Long on Gold with 74% of retail merchants holding Long positions. Given the Contrarian View to Crowd Sentiment Adopted Here at DailyFX, is that this an indication that Gold might proceed to fall?
For a extra in-depth have a look at shopper sentiment and methods to make use of it, obtain the complimentary information beneath.
of shoppers are web lengthy.
of shoppers are web brief.
| Change in | Longs | Shorts | OI |
| Daily | 6% | -18% | -1% |
| Weekly | -8% | -5% | -7% |
Written by: Zain Vawda, Markets Writer for DailyFX.com
Contact and observe Zain on Twitter: @zvawda
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