Weekly Fundamental Gold Price Forecast: Can You Trust The Rebound In XAU/USD?

Despite the stabilization seen at the end of the week, gold prices have barely rebounded from their lowest level since mid-July, having previously broken through the August swing low near 1818.09. By breaching the cluster of Fibonacci retracements above 1800 and plunging thereafter, gold price action suggests that the recent weakness is not just transient.

Gold price momentum remains bearish, with gold prices below their daily 5-, 8-, 13-, and 21-EMA envelope, which is still in bearish sequential order. Daily MACD continues to trend lower below its signal line, while Slow Stochastics are still sitting in oversold territory.

GOLD PRICE TECHNICAL ANALYSIS: WEEKLY CHART (OCTOBER 2015 TO DECEMBER 2020) (CHART 2)

Weekly Fundamental Gold Price Forecast: Can You Trust The Rebound in XAU/USD?

With the 38.2% Fibonacci retracement of the 2020 low/high range at 1836.97 breaking as well, the weekly charts are suggesting that a near-term top has been established. Further losses towards the 50% Fibonacci retracement of the 2020 low/high range at 1763.36 can’t be ruled out. The path of least resistance is lower.

GOLD PRICE VERSUS COT NET NON-COMMERCIAL POSITIONING: DAILY TIMEFRAME (DECEMBER 2019 TO DECEMBER 2020) (CHART 3)

Weekly Fundamental Gold Price Forecast: Can You Trust The Rebound in XAU/USD?

Next, a look at positioning in the futures market. According to the CFTC’s COT data, for the week ended December 1, speculators decreased their net-long gold futures positions to 240.5K contracts, down from the 251K net-long contracts held in the week ended November 17 (no update for the week ended November 24 given the US Thanksgiving holiday).

The gold futures market is still nowhere near its high watermark for participation: the all-time high for net-long contracts came during the week of February 18, 2020, when 353.6K were held. It still holds that there’s significant room for speculators to drive significant gold price swings through the end of the year.

IG CLIENT SENTIMENT INDEX: GOLD PRICE FORECAST (DECEMBER 4, 2020) (CHART 4)

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