Gold (XAU/USD) Within Touching Distance of a New All-Time High

Gold price (XAU/USD), chart, and analysis

• August 2020 high at $2,075/oz. Under threat.
• US Retail Sales and Michigan Consumer Confidence were released later.

Most read: Gold may test its highest level in several months if a bullish technical pattern emerges

Dollar weakness and the growing realization that US interest rates have either peaked or are very close to peaking continue to push gold higher than ever. A new all-time high is within reach and this is likely to draw more attention to the precious metal.

The US dollar is under pressure as traders continue to price in the prospect of a rate cut later this year. The Fed’s current fund rate of 475-500 is currently seen moving 25 basis points up to 500-525 at the FOMC meeting in May, and staying at that level in June before the rate cuts kick in in July. The latest CME Fed Fund Forecast predicts that the fed funds will be in the 425-450 range by the end of the year. This expected easing of the federal monetary policy weighs heavily on the US dollar, especially against other currencies that are still in tightening mode. The euro is one such currency, and ECB talk continues to indicate that the central bank will continue to raise interest rates to counter inflation. The euro accounts for roughly 58% of the US Dollar Index – a basket of six currencies used to value the US dollar – and with the European Central Bank still in tightening mode, it looks likely that the dollar will depreciate further.

US Dollar Index Daily Price Chart – Apr 14, 2023

Later in today’s session, we have two important US economic data releases namely Retail Sales and Consumer Confidence in Michigan. Retail sales data is an important gauge of high street activity, while the Michigan Consumer Confidence report is an important gauge of consumers’ expectations, outlook, and economic outlook. Both can move the market if expectations are missed or beaten by a margin.

For all market-moving data releases and events, see DailyFX Economic Calendar

Zigzag patterns: trade the bullish and bearish pennants

Gold is currently trading at just under $2040 an ounce, up nearly $60 an ounce. From this week’s low print. In recent posts I have noticed a bullish scientific pattern forming on the daily chart of gold and this continues to drive the technical price action. If this formation holds, the all-time high is at $2,075/0z. They will be pressured. Short-term support is seen around $2032 an ounce. Before $2,009/oz.

Daily gold price chart – April 14, 2023

Charts via TradingView

Retailers are increasing their net short positions as well

Retail trader data shows that 49.84% of traders are net long with the ratio of short to long traders at 1.01 to 1, the number of long-term traders is 8.53% less than yesterday and 2.54% less than last week, while the number of traders is Traders’ net short positions are 19.11% higher than yesterday, and 15.64% higher than last week.

We usually take a view contrarian to crowd sentiment, and the fact that traders are short sellers suggests that gold prices could continue to go higher. Traders are more net-handed than yesterday and last week, and the combination of current sentiment and recent changes gives us a bullish contrarian trading bias for gold.

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