Gold Prices In Tug-Of-War Between USD Strength And Safe-Haven Demand

Gold prices are lower for the fifth consecutive week with the precious metal down 0.3% to trade at 1211 ahead of the New York close on Friday. The decline takes price back into key support we’ve been tracking for weeks now and comes amid rising geo-political tensions and as broader equity markets flat-lined. Renewed strength in the US Dollar has been unable to materially impact gold as of late with haven demand starting to offer more meaningful support for the battered metal. But is it enough to turn the tide on this massive multi-month sell-off?

GOLD BEARS WEIGH RISK OF FLIGHT TO SAFETY VS US DOLLAR STRENGTH

Signs that the US economy remains on solid footing were reinforced on Friday with the August US Consumer Price Index (CPI) showing a surprise uptick in the core rate of inflation to the tune of 2.4% y/y. Fed Fund futures are still pricing in a 60% chance for a fourth rate hike in December – remember, expectations for highs rates will typically weigh on gold prices which have already been hampered by continued strength in the US Dollar.

However with mounting geo-political tensions (the China Trade War, the economic rift with Turkey and the announcement of increased sanctions on Russia), a flight to safety may yet offer some support to gold prices which have plummeted more than 11% off the yearly highs. Despite the decline in price, gold has managed to hold just above a key pivot in price and heading into next week the focus remains on a reaction off the recent lows.

SPOT GOLD IG CLIENT POSITIONING

Gold IG Client Sentiment

 

  • A summary of IG Client Sentiment shows traders are net-long Gold- the ratio stands at +6.71 (87.0% of traders are long) –bearish reading
  • Long positions are 3.5% higher than yesterday and 1.1% higher from last week
  • Short positions are 3.6% lower than yesterday and 9.2% higher from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Spot Gold prices may continue to fall. Traders are more net-long than yesterday but less 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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Disclosure: Do you want to see how retail traders are currently trading the US Dollar? Check out our IG Client Sentiment ...

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