Despite supporting US Treasury yields, the US currency is weakening.
Despite four decades of strong US inflation, gold is regaining ground between $1,830 and $1,836 per ounce. As traders unwind their aggressive bets on the greenback, the precious metal is benefiting from a spell of weakness in the US dollar. Prior to this year, the US dollar had been a one-way trade, with bulls controlling market action, aided by an increasingly hawkish Federal Reserve. With the Fed's intentions now clear to all, some US dollar bets are being unwound, despite the fact that US Treasury yields remain supportive. The interest-rate sensitive is currently quoted at around 0.92 percent, up from around 0.20 percent just four months ago, with the benchmark 10-year at 1.75 percent. Despite the current bout of US dollar weakness, these Treasury yields will continue to support the greenback, weighing on the price of gold.
Since mid-November, gold has been trading in a fairly well-defined range, with a couple of false support breaks pulling it back sharply. The precious metal has been trending higher in recent weeks, though recent attempts have been thwarted by a zone of resistance between $1,830/oz. and $1,836/oz. Gold is likely to attempt another break higher, and if successful, the precious metal will aim for the mid-November high of $1,877/oz. The moving average setup is mixed, and the CCI indicator indicates that gold is becoming overbought, implying that a confirmed break above resistance will be difficult.
GOLD (XAU/USD) DAILY PRICE JANUARY 13, 2022
According to retail trader data, 64.23 percent of traders are net-long, with a long-to-short ratio of 1.80 to 1. The number of traders net-long is 1.45% lower than yesterday and 4.69% lower than last week, while the number of traders net-short is 0.10 percent higher than yesterday and 30.70% higher than last week.
We tend to be contrarian when it comes to crowd sentiment, and the fact that traders are net-long suggests that gold prices may continue to fall.
Traders are, however, less net-long today than they were yesterday and last week. Despite the fact that traders remain net-long, recent changes in sentiment indicate that the current gold price trend may soon reverse higher.