Gold, XAU/USD, US Debt Ceiling, Technical Analysis – Brief:
- gold prices It fell on Wednesday, continuing its recent losing streak
- Bets of a breach of the US debt ceiling pushed Treasury yields higher
- XAU/American dollar Facing breakout support and a bearish IGCS signal
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Gold prices fell on Thursday, extending the yellow metal’s recent losing streak. This week is shaping up to be a 1.45% decline for the XAU/USD pair. If confirmed, this would be the worst 5-day period since the end of February. Let’s take a closer look at what’s going on and what we can expect going forward.
Gold is a trading unit against fiat currencies. Its peak correlated almost perfectly with a bottom in the two-year Treasury yield. The latter has risen about 10% since finding support earlier this month. Meanwhile, the US dollar has also risen over the past few weeks.
In short, recent economic updates from the US have been pouring cold water on bets for a Fed rate cut in the near term. Over the past 24 hours, financial markets appeared to enjoy the prospect of a breakthrough in a bipartisan gambit in Washington to raise the US debt ceiling, and avoid default.
With that in mind, if the rosy sentiment in financial markets persists, gold could remain vulnerable in the remaining 24 hours. All eyes will then be on Thursday’s Initial Jobless Claims report. These are some of the more timely data on the state of the US labor market amid rising interest rates.
XAU/USD daily chart
Gold continues making a downward progression following the Shooting Star candlestick chart pattern. The anti-paper yellow metal barely closed below the 50-day simple moving average (SMA). Further confirmation of the downside could spell trouble, exposing the 100-day equivalent.
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Chart created using TradingView
Gold sentiment analysis – bearish
According to IG Customer Viewpoint (IGCS), about 64% of retailers are pure gold. IGCS tends to act as the opposite indicator. With this in mind, since most traders are long, this indicates that prices may continue to decline. This is because bullish exposure increased by 10.93% and 23.31% compared to yesterday and last week, respectively. With that in mind, recent changes in exposure provide a stronger contrasting bearish bias.
– By Daniel Dubrovsky, Chief Strategist for DailyFX.com
