Gold Prices Fueled By Fire & Fury

Gold Prices Fueld by Fire & Fury

Fundamental Forecast for Gold: Bullish

  • Gold rally eyes resistance as threat of ‘Fire & Fury’ weigh on risk appetite

Gold prices rallied this week with the precious metal up 2.3% to trade at 1287 ahead of the New York close on Friday. The advance comes amid growing geopolitical tensions between the U.S. and North Korea with fears over an impending war weighing on global equity markets, all of which closed lower on the week.

As investors wait to see how the Korean threat plays out, U.S. economic data has also continued to come in soft with headline PPI & CPI data missing estimates this week. Highlighting the economic docket next week will be the July retail sales and the release of the minutes from the latest FOMC policy meeting. Expectations for a December rate-hike have all but diminished with Fed Fund Futures pricing just a 30% chance the central bank will deliver on its promise for a final 25 bps hike this year.

With interest rate expectations continuing to fall, rising geo-political tensions and weakness in broader risk assets weighing on sentiment, gold is likely to remain well-supported in the medium-term. That said, prices are now approaching the 2017 highs and while our broader outlook remains weighted to the topside, the immediate advance is at risk heading into resistance just higher.

Gold Prices Fueld by Fire & Fury

  • A summary of IG Client Sentiment shows traders are net-long Gold - the ratio stands at +2.05 (67.2% of traders are long)- bearish reading
  • Long positions are 9.5% lower than yesterday but 7.6% higher from last week
  • Short positions are 3.1% higher than yesterday and 3.6% lower from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Spot Gold prices may fall. That said, retail is less net-long than yesterday but more net-long from last week and the combination of current positioning and recent changes gives us a further mixed Spot Gold trading bias from a sentiment standpoint.
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