Gold Price Bullish Breakout Begins amid Topside Range Breach

Gold Price Talking Points:

  • Gold prices have damaged out of a 1266.18 to 1288.58 range, that has been in place given Apr 15.
  • Now that bullion sensitivity has started to spin higher, bullion prices might be upheld in a near-term.
  • Changes in retail trader positioning advise that bullion prices can still trade higher.

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With tellurian risk resources descending in tandem as a week and month come to a close, bullion prices have captivated poignant certain attention. The total tumble in US equity markets, US Treasury yields, and a US Dollar has increased direct for gold. Rising doubt around tellurian trade continues to disease financier sentiment, and questions over scanty US expansion conditions have once again started to incite conjecture over a Federal Reserve rate cut this year.

For bullion prices, this is maybe a ideal mixture of news upsurge and cross-asset marketplace reactions for a near-term spin to a topside. With US genuine yields dropping (nominal Treasury yields are descending while acceleration hasn’t moved) and a denominated banking (US Dollar) pulling behind from a yearly highs, there are concrete elemental reasons for bullion prices to be trade higher.

GVZ (Gold Volatility) Technical Analysis: Daily Price Chart (May 2018 to May 2019) (Chart 1)

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As was remarkable yesterday, maybe a best growth for bullion prices in a near-term has been how bullion sensitivity and bullion prices have interacted in new days. Even as bullion sensitivity fell to an all-time shutting low progressing this week, bullion prices did not follow suit; we suggested that this was a bullish pointer for bullion. Now, with bullion sensitivity rising again, bullion prices have seen a swell to a topside.

Gold Price Technical Analysis: Daily Chart (April 2018 to May 2019) (Chart 2)

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Now that bullion prices have traded above 1288.58, we are topside mangle of a converging as good as a downtrend from a Feb and Mar 2019 highs. To this end, while a foresee has shifted in a bullish direction, bullion prices now need to transparent 1303.21, a May high, in sequence to concrete their bullish dermatitis move.

Ultimately, if bullion prices have been consolidating in a bullish descending throng given January, afterwards a depot cost aim would be for a lapse to a 2019 high during 1346.61.

IG Client Sentiment Index: Spot Gold Price Forecast (May 31, 2019) (Chart 3)

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Spot gold: Retail merchant information shows 73.4% of traders are net-long with a ratio of traders prolonged to brief during 2.76 to 1. The commission of traders net-long is now a lowest given May 15 when it traded nearby 1296.78. The series of traders net-long is 12.5% reduce than yesterday and 10.7% reduce from final week, while a series of traders net-short is 15.7% aloft than yesterday and 14.6% aloft from final week.

We typically take a contrarian perspective to throng sentiment, and a fact traders are net-long suggests spot gold prices might continue to fall. Yet traders are reduction net-long than yesterday and compared with final week. Recent changes in perspective advise that a stream spot gold cost trend might shortly retreat aloft notwithstanding a fact traders sojourn net-long.


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— Written by Christopher Vecchio, CFA, Senior Currency Strategist

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