The sharp turn lower in the US dollar since the November 4th US Jobs Report has seen the greenback lose over 6% of its value and fall back to levels last seen three months ago. The markets are now expecting the Federal Reserve to take its foot off the accelerator and raise rates by 50 basis points in December as the unemployment rate in the US nudges higher, while inflation begins to cool, albeit from a red-hot rate. Market positioning may also have added momentum to the downturn with traders previously heavily long of the US dollar. Short-dated US bond yields are lower but still remain at elevated levels, suggesting that the fall in the US dollar may soon stall. A zone of support between 104.68 and 105.78 looks likely to hold any move lower in the short term.
 

US Dollar Currency Index Daily Chart

(Click on image to enlarge)

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On a low-to-high basis, gold has rallied by over 10% in November, erasing three months of declines. As mentioned above the weakness of the greenback has given gold room to recover and the precious metal’s next move will still be dictated by the USD. A technical zone of resistance lies ahead with the $1,800/oz. big figure level, the $1,804/oz. 200-day simple moving average and a prior horizontal level of support turned resistance at $1,807/oz. all blocking any move higher. Gold may test this level but it will need more US dollar weakness to help it to break it with any conviction.
 

Gold Daily Price Chart

(Click on image to enlarge)

Chart via TradingView

Retail trader data show 69.76% of traders are net-long with the ratio of traders long to short at 2.31 to 1. The number of traders net-long is 1.43% higher than yesterday and 14.76% lower from last week, while the number of traders net-short is 9.98% higher than yesterday and 15.18% 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.

What is your view on Gold – bullish or bearish?

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