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Abstract:WEEKLY FUNDAMENTAL GOLD PRICE FORECAST: NEUTRAL
Gold prices are facing difficulties in the coming days as more and more central banks take a hawkish turn.
The last week of October may have served as a precursor for a much weaker environment to come for gold prices.
Gold prices struggled mightily last week, against all major currencies but for the Euro (gold in EUR-terms (XAU/EUR), +0.23%) and the British Pound (gold in GBP-terms (XAU/GBP), 0%). Rapidly rising bond yields, particularly among the commodity currency sovereigns – Australia, Canada, and New Zealand – plagued precious metals. Gold in AUD-terms (XAU/AUD) dropped by -1.27% on the week, the worst performing gold-cross, while gold in NZD-terms (XAU/NZD) fell by -0.67%), the second worst performing gold-cross. Even gold in USD-terms (XAU/USD) closed the week lower by -0.51%, thanks in part to the sharp end-of-month rally by the US Dollar (via the DXY Index).
Coming into the first week of November where a trio of major central banks are expected to take a more hawkish turn – the Bank of England, the Federal Reserve, and the Reserve Bank of Australia – the last week of October may have served as a precursor for a much weaker environment to come for gold prices.
- On Monday, gold in USD-terms (XAU/USD) will be in the spotlight as the October US Markit Manufacturing PMI and October US ISM Manufacturing PMI will be released shortly after the US cash equity open.
- On Tuesday, gold in AUD-terms (XAU/AUD) will garner attention amid the November Reserve Bank of Australia rate decision, while gold in NZD-terms (XAU/NZD) will likewise be in focus around the release of the 3Q21 New Zealand labor market report.
- On Wednesday, gold in USD-terms (XAU/USD) is back at the forefront of gold-crosses thanks to the November Federal Reserve rate decisions.
- On Thursday, gold in GBP-terms (XAU/GBP) is in the spotlight when the Bank of England concludes its November rate decision, which will include the release of the Quarterly Inflation Report.
- On Friday, the week concludes with gold in CAD-terms (XAU/CAD) and gold in USD-terms (XAU/USD) in focus as the October Canada labor market report and October US NFP report are released ahead of the US cash equity open.
Next, a look at positioning in the futures market. According to the CFTCs COT data, for the week ended October 26, speculators increased their net-long gold futures positions to 225,443 contracts, up from the 199,446 net-long contracts held in the week prior. The futures market is now the most net-long since the second week of June.
Gold: Retail trader data shows 78.48% of traders are net-long with the ratio of traders long to short at 3.65 to 1. The number of traders net-long is 10.17% higher than yesterday and 16.01% higher from last week, while the number of traders net-short is 3.83% lower than yesterday and 1.12% higher from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Gold prices may continue to fall.
Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger Gold-bearish contrarian trading bias.
Source: DailyFX
Disclaimer:
The views in this article only represent the author's personal views, and do not constitute investment advice on this platform. This platform does not guarantee the accuracy, completeness and timeliness of the information in the article, and will not be liable for any loss caused by the use of or reliance on the information in the article.
GOLD, XAU/USD, TREASURY YIELDS, CORE PCE, TECHNICAL ANALYSIS - TALKING POINTS:
EUR/GBP PRICE, NEWS AND ANALYSIS:
The dollar was up on Thursday morning in Asia, with the yen and euro on a downward trend ahead of central bank policy decisions in Japan and Europe.
AUSTRALIAN DOLLAR, AUD/USD, JAPAN RATE DECISION, AUSTRALIA EXPORT PRICES – TALKING POINTS