Chances of correction in Gold prices increase – TDS

FXStreet Insights Team FXStreet

The Fed is in all likelihood going to cut rates in the next few weeks and everyone knows it, TDS Senior Commodity Strategist Daniel Ghali notes. This scenario is favoring Gold, but chances of a correction are increasing day by day, he says.

Downside risks for Gold are more potent

“Our gauge of macro fund positioning in Gold is now at the highest levels recorded in the depths of the pandemic. This red flag marked the local highs set in Sep 2019, and previously in Jul 2016. Symmetrically, extreme short positioning from this cohort marked the lows in 2018 and 2022.”

“This time around, CTAs are also max long and Shanghai traders' net length has also inched towards record highs. Algos are also vulnerable in silver, with most scenarios for prices pointing to selling activity on the horizon, barring a break north of $31.5/oz.”

“This set-up is the antithesis to the early-year dichotomy in positioning that helped to propel Gold on its trajectory towards current all-time highs. Downside risks are now more potent. The ship is crowded. In fact, it has scarcely been as crowded as it is today. Do you have a slot secured on the lifeboat?”

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

AUD/USD sits at two-month lows near 0.6950 after Australian CPI data

AUD/USD is sitting at two-month lows near 0.6950 in the Asian session on Wednesday, as below-expectations August Australian underlying CPI data pours cold water on expectations for further RBA interest rate hikes. Chinese PMI data also fail to inspire the Australian Dollar, despite a pause in the US Dollar advance.

USD/JPY stays weak below 157.00 amid Japanese intervention risks

USD/JPY keeps losses below 157.00 in the Asian session on Wednesday, as hawkish BoJ expectations, along with intervention risks, underpin the Japanese Yen, countering dismal domestic factory output and retail sales data. Meanwhile, a broad US Dollar retreat also collaborates to the pair's downside.

Gold flat lines below $4,200, ahead of US inflation data

Gold extends its consolidative price move in the European session, trading near the $4,200 mark. Falling US bond yields drag the US Dollar away from the two-month high, touched on Tuesday, and act as a tailwind for the commodity. However, hawkish US Federal Reserve expectations cap the upside as traders await important US macro data before placing fresh directional bets on the non-yielding bullion.

Bitcoin consolidates below $85,000 amid rising US Treasury yields, derivatives deleveraging

Bitcoin consolidates near $83,000 at the time of writing on Wednesday after bulls failed to close above the key $85,000 level earlier this week. The Crypto King's investors remain cautious amid rising US Treasury yields and several key macroeconomic data releases due this week.

US core PCE inflation set to rise in August, pressuring the Federal Reserve

The United States Bureau of Economic Analysis will publish the Personal Consumption Expenditures Price Index data for August on Wednesday at 12:30 GMT. Market participants closely watch the PCE Price Index because it is the Federal Reserve’s preferred measure of inflation and could influence its policy outlook.

Silver is more volatile than Gold ahead of PCE and NFP. This chart shows the positioning gap

The market’s attention is focused on American data this week, but there’s something only those with a trained eye may be looking at: Gold and Silver positioning gap. Financial markets are moving on fears, mostly related to persistently high energy prices driven by the Middle East war. Sure, the US Dollar (USD) is strong, but at what cost?