Topside Targets Remain On Radar For Gold As Bullish Momentum Picks Up

Gold looks poised to test the monthly-high ($1279) as global equity prices come back under pressure, and the current environment may fuel the recent strength in the precious metal as the bullish momentum appears to be gathering pace.

Image of daily change for major financial markets

TOPSIDE TARGETS REMAIN ON RADAR FOR GOLD AS BULLISH MOMENTUM PICKS UP

Image of daily change for gold prices

Gold prices remain bid as the ongoing U.S. government shutdown drags on risk appetite, and the uncertainty surrounding fiscal policy may ultimately push the Federal Open Market Committee (FOMC) to endorse a wait-and-see approach at the next interest rate decision on January 30 as the gridlock in Congress drags on the economic outlook.

Image of fed fund futures

Even though Federal Reserve officials forecast a longer-run interest rate of 2.75% to 3.00%, Chairman Jerome Powell & Co. may come increased under pressure to conclude the hiking-cycle ahead of schedule as policymakers ‘see growth moderating ahead.’ In turn, Fed Fund Futures may continue to reflect diminishing bets for an imminent rate hike, with the central bank now expected to stay on hold throughout the first-half of 2019 especially as the ongoing shift in U.S. trade policy clouds the outlook for global growth.

Waning expectations for higher U.S. interest rates are likely to keep gold prices afloat, and the recent pickup in volatility appears to be spurring profit-taking behavior as bullion trades at six-month highs.

Image of IG client sentiment for gold

The IG Client Sentiment Report shows the index narrowing from an extreme reading, with 76.8% of traders now net-long compared to 78.5% last week, while the ratio of traders long to short stands at 3.31 to 1. The number of traders net-long is 0.5% higher than yesterday and 5.5% lower from last week, while the number of traders net-short is 5.0% higher than yesterday and 15.0% higher from last week.

The persistent tilt in retail interest casts a long-term bearish outlook for gold as it offers a contrarian view to crowd sentiment, but the recent decline in net-long interest is indicative of profit-taking behavior, while the jump in net-short position suggests traders are starting to fade the recent advance in gold as it comes up against a former-support zone.

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Disclosure: Do you want to see how retail traders are currently trading the US Dollar? Check out our IG Client Sentiment ...

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