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Price of Gold Fundamental Daily Forecast – Traders Flipping Direction Indicates Short-Term Confusion

By:
James Hyerczyk
Published: May 6, 2019, 14:05 UTC

The price action the last few sessions suggests investors are confused about the direction of near-term gold prices. The daily chart points to evidence of investors flipping from short to long then short again.

Comex Gold

Gold futures are trading lower on Monday after an early session rally failed to gain traction. Shortly after the market opened on Sunday night, safe-haven buying drove gold prices higher along with other safe-haven assets like the U.S. Dollar, U.S. Treasurys and the Japanese Yen.

The rally was fueled by a steep drop in demand for higher risk assets after U.S. President Donald Trump threatened to raise tariffs on Chinese goods. A Chinese delegation of negotiators then cancelled this week’s meetings, escalating U.S.-China trade tensions and driving investors into the safety of gold.

At 13:46 GMT, June Comex gold futures are trading $1278.30, down $3.00 or -0.22%.

To recap the events from overnight, Trump on Sunday announced he would hike tariffs on $200 billion worth of Chinese goods this week. He also said he would target a further $325 billion of Chinese goods with 25 percent tariffs “shortly”, essentially covering all products imported into the United States and China.

In other news, hedge funds and money managers switched to a net long position in COMEX gold in the week to April 30, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday. Additionally, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange traded fund, were at their lowest since October 11. Holdings fell 0.6 percent.

Daily Forecast

The price action the last few sessions suggests investors are confused about the direction of near-term gold prices. The daily chart points to evidence of investors flipping from short to long then short again.

Last week for example, investors pressed the short-side of the market into a four-month low after U.S. Federal Reserve Chairman Jerome Powell dashed hopes of a rate cut later this year.

However, Friday’s mixed U.S. economy reports triggered a short-covering rally, suggesting that perhaps a rate cut was back on. Then Sunday’s news spiked prices further, only to fail as the U.S. Dollar strengthened.

The current price action suggests gold could become rangebound; however, the range is likely to be wide. A move through $1291.00 could send prices soaring to about $1310.00, but a break through $1267.30 signals a potential break into around $1250.00.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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