- Gold is accumulating above $1,700 and eyes are on a significant bullish correction.
- Bears, on the other hand, anticipate that the rally will ultimately fade faced with a wall of offers.
As per the prior analysis, Gold price could be on the verge of a significant correction, Fed meeting will be decisive, the gold price has mitigated a significant price imbalance on the weekly chart ahead of a critical event in this week's Federal Open Market Committee meeting.
From a fundamental standpoint, a correction makes sense as the clash between slowing growth and rate hikes will bring volatility to gold prices. Recession fears have led to dialling back in rates markets that have started to price out elevated odds for a 100bp hike. This has enabled the gold price to correct higher for a bullish weekly close on Friday and should the outcome of this week's Fed be in line with recent flattening in the US yield curves, then the gold price would be expected to maintain its corrective trajectory away from pre-pandemic levels.
On the other hand, analysts at TD Securities argue that from a positioning lens, the behemoth position held by the average prop-trader is still nearly twice its typical size, suggesting a substantial amount of pain will reverberate across gold markets as prices revert lower. ''We have yet to see capitulation in gold, suggesting the recent rally will ultimately fade faced with a wall of offers.''
US 10-year yield bleeds-out
Meanwhile, the technicals can do the talking. Taking into account, first of all, the fall out in yields. The 10-year yield is trading near 2.734%, the lowest since May 27:
The broadening formation is compelling which allows more room to the downside, which could be expected to support gold prices.
Gold weekly chart
The M-formation is a strong feature on the gold charts with a 50% mean reversion on the cards should the next major area of price imbalance be mitigated, grey area, on the way to a potential 61.8% golden ration reversion:
Gold daily chart
Meanwhile, the daily chart's W-formation is a probable pull on the gold price where it would be expected to revisit the neckline for a restest of the bull's commitments near $1,700 prior to a full-on drive higher in the coming days.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.