Gold (XAU/USD) – Poised to Set a New All-Time High Latest Sentiment Analysis
The price of gold remains on an upward trajectory, nearing a test of the all-time high of $2,480/oz set on May 20th. The recent surge is fueled by renewed speculation that the Federal Reserve will reduce rates by 25 basis points in mid-September. Financial markets are currently factoring in a total of 65 basis points in cuts for the year, with uncertainty lingering over the possibility of a third rate reduction.
On the daily chart, gold is approaching the upper boundary of its multi-month range, supported by the 20- and 50-day simple moving averages. The CCI indicator indicates that gold is in overbought territory, suggesting a potential brief consolidation phase before reaching new highs.
GOLD DAILY PRICE CHART
Charts using TradingView
According to retail trader data, 49.86% of traders are currently holding long positions, with a short-to-long ratio of 1.01 to 1. The percentage of traders holding long positions has decreased by 1.69% compared to yesterday and by 12.94% compared to last week. Conversely, the percentage of traders holding short positions has increased by 5.27% from yesterday and by 16.85% from last week.
Our approach typically leans contrarian to crowd sentiment. Given that traders are net-short, there is a suggestion that Gold prices could continue to climb. Moreover, the increase in net-short positions compared to both yesterday and last week strengthens our bullish contrarian trading bias for Gold.
Gold has seen a rise, bolstered by last week’s lower US CPI data, paving the way for further gains. The precious metal thrives in environments of reduced interest rates, and the anticipation of a Federal Reserve rate cut in September has reignited optimism among gold bulls.
Previously, gold had been consolidating around the 161.8% Fibonacci extension level of the significant decline from 2020 to 2022. However, recent upward momentum has pushed it beyond this level. In May, gold briefly hit a new all-time high before experiencing a pullback, partly influenced by reduced monthly purchases from China, the world’s largest consumer of gold.
The future direction of gold hinges on whether a combination of a weaker dollar and lower US yields can stimulate bullish demand at already elevated price levels. Central to the recent market dynamics is the growing expectation of a Federal Reserve interest rate cut in September. Investors have fully priced in this cut and are now contemplating the possibility of two rate reductions by the end of the year, with a 50% probability of a third.
Gold’s volatility has eased recently as tensions in Eastern Europe and the Middle East have diminished, despite ongoing conflicts. However, 30-day implied gold volatility (GVZ) has shown recent upticks. Moving forward, a significant catalyst would be necessary to attract buyers back in substantial numbers to sustain prices well above the previous all-time high.
