The price of gold turned sharply higher Wednesday, aided by a weaker US dollar, and the precious metal is now running into a cluster of resistance which may prove tricky to overcome in the short-term. Gold has gained around $60 from its low print on Monday and is now running into a cluster of moving averages between $1,854/oz. and $1,874/oz. This area may provide stubborn resistance in the short-term with the CCI indicator also showing that gold is no longer oversold. If these simple moving averages are broken, the precious metal may re-test the $1,921/oz area ahead of the 23.6% Fibonacci retracement at $1,928/oz. Initial support is seen at $1,837/oz. the 38.2% Fibonacci retracement level.

The US dollar continues to guide gold and with the new Biden administration promising to keep the printing press going in order to re-boot the economy, expectations remain that the US dollar will likely weaken further, or at least any upside will be capped. The recent rally in the US Treasury space has ended and been mostly retraced, and 10-year real yields continue to trade around negative 108 basis points.

GOLD DAILY PRICE CHART (MARCH 2020 – JANUARY 21, 2021)

IG retail trader data show 81.78% of traders are net-long with the ratio of traders long to short at 4.49 to 1. The number of traders net-long is 5.47% lower than yesterday and 2.23% lower from last week, while the number of traders net-short is 14.34% higher than yesterday and 14.12% 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. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current Gold price trend may soon reverse higher despite the fact traders remain net-long.