GOLD (XAU/USD) KEY POINTS:
Gold prices have enjoyed a good bounce following a selloff in yesterday US session pushed the precious metal below the $1950 handle. The move was short lived however, as buying pressure returned and continued through the Asian session with Gold reaching $1962/oz at the time of writing.
US 2Y and 10Y Yields
Source: TradingView, Prepared by Zain Vawda
US RETAIL SALES AND EARNINGS AHEAD
Gold it appears has switched one range for another as we appear to be in another phase of consolidation between the $1940 and $1963 handle, the latter of which was last week’s high. As the Dollar Index (DXY) continues to struggle Gold is likely to remain supported with any push to the downside to be short lived, similar to what transpired yesterday. US Yields much like the DXY attempted to bounce yesterday before continuing its downside move with the US 10Y within of a whisker of breaking last week’s lows around 3.765%.
The US will release Retail Sales data today while US earnings resumes with Bank of America kicking things off. Positive earnings today could weigh on gold prices as market participants may pour into US equities/indices. Retail sales data could offer the dollar some temporary support with a lower-than-expected print as many investment houses expect consumption to have softened significantly as US interest rates begin to weigh on consumers. Will the estimates and forecast prove correct and offer the DXY a temporary reprieve?
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TECHNICAL OUTLOOK AND FINAL THOUGHTS
Form a technical perspective, Gold prices do appear poised for further upside with yesterday’s daily candle closing as a doji at a key area of support. A daily candle close around the $1960 mark or higher will also see a Morningstar candlestick pattern form, a further hint at higher prices.
Despite these signs, as mentioned in my weekly forecast over the weekend the weekly timeframe appears to be hinting at further downside while on the daily timeframe above, we have also recently had a death cross pattern as the 50-day MA crossed below the 100-day MA. An indication of the recent indecisive nature we have seen in Gold price action as well. The indecision and mixed signals from the technical and price action may see any potential moves at this stage be rather short-lived without any clear picture on the longer-term trend for Gold prices.
Gold (XAU/USD) Daily Chart – July 18, 2023
Source: TradingView, Chart Prepared by Zain Vawda
IG CLIENT SENTIMENT DATA
Taking a look at the IG client sentiment data and we can see that retail traders are currently netLONGonGoldwith64%of traders holding long positions (as of this writing). At DailyFX we typically take a contrarian view to crowd sentiment meaning we could see Gold prices continue to decline following a short upside rally.
Written by: Zain Vawda, Markets Writer for DailyFX.com
Contact and follow Zain on Twitter: @zvawda