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Speculative Longs and Shorts Increase Positions, Will Gold Price Decline Await More Signals from Powell?

    Gold is expected to fluctuate downward with resistance levels at $1905 and $1930, and support levels at $1885 and $1805. Last week, gold continued its decline due to better-than-expected US retail data for July. Based on CFTC positioning data and technical analysis, the medium to long-term downtrend in gold remains unchanged, with a possibility of short-term or choppy declines.

    ​Market Review

    In the past week (Aug 14-20), precious metals experienced mixed movements, with gold declining by 1.3% and silver recording a slight increase of 0.6%. The release of better-than-expected US July retail sales data caused gold to drop by $6 and fall below $1900 to reach $1888.19.


    Source: MacroMicro - Percentage Change of Major Precious Metal futures in the 3rd Week of August

    July Retail Sales Exceed Expectations, Gold Falls Below $1900 Key Level

    On Aug 16th, data released by the US Department of Commerce showed that US retail sales increased by 0.7% on a MOM basis in July, significantly surpassing market expectations of 0.4%. This marked the largest increase since January 2023 and the fourth consecutive month of growth. Following the data release, the US dollar index rose by 20 points in the short term, while the yields of 10-year and 2-year US Treasury bonds reached new highs since October 24 last year and July 7 this year, standing at 4.270% and 5.024%, respectively. Gold declined by $6 and briefly fell below the $1900 level.

    Mitrade Analyst 

    Market expectations suggest that US inflation will remain around 3% for an extended period, and it is believed that the Fed will not continue raising rates in September but maintain high rates for a prolonged period. This would provide support to the US dollar and contribute to sustained high US bond yields, which are unfavorable for a gold rebound. The outlook for gold remains bearish.

    Looking ahead, if upcoming macroeconomic data in the US continues to show strength, indicating the resilience of the US economy, there is a strong possibility that the market will expect the Fed to maintain a hawkish stance. This would further support an increase in US Treasury bond yields and strengthen the US dollar. Tim Waterer, Chief Market Analyst at KCM Trade, believes that "if the US dollar index remains above 103, progress for assets like gold will be quite difficult."

    In addition, this week's Global Central Bank Symposium held in Jackson Hole, Wyoming on August 24 will discuss global economic and interest rate prospects. Attendees will include central bank governors from various countries, including Fed Chair Powell. There is still disagreement among market investors regarding whether the United States will pursue a moderate or aggressive monetary policy, and they may await more signals from Powell.

    Significant Increase in Short Positions, Aggressive Longs Seek Entry, Bearish Outlook for Gold

    Speculative short positions in gold have seen a substantial increase recently. According to the latest CFTC positioning data, during the period from Aug 9-15, speculative long positions decreased by 21,849 to 121,136, while speculative long positions in gold futures increased by 4,232 to 233,078 compared to the previous period. Additionally, short positions increased significantly by 26,081. These figures indicate that short-term market investors are adopting a wait-and-see attitude toward the future of gold, while aggressive investors are bearish on gold.

    Mitrade Analyst

    In summary, speculative markets show a slight increase in long positions but a significant increase in short positions, indicating a divergence among investors regarding the outlook for gold, which leans towards a bearish sentiment overall. Gold may experience a choppy decline this week.


    Technical Analysis

    From a technical perspective, the 60-day MA shows a downward trend. The 14-day RSI value of 33 is below 60. Moreover, the MACD line has crossed below the longer-term signal line in a bearish "death cross" pattern. The MACD histogram remains below the zero line, indicating negative values for both DIFF and DEA. These indicators suggest a bearish market for gold.

    Resistance levels: 1903, 1930

    Support levels: 1885, 1803


    Source: Investing.com- Aug 21h Gold Daily Chart


    Mitrade Analyst 

    Considering the analysis of various indicators, the medium to long-term downtrend in gold remains unchanged, and there is a possibility of a choppy decline in the short term. Investors should also pay attention to news and economic data that may provide guidance for the future direction of gold, such as speeches by Fed Chair Powell.

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