Gold Prices: Geopolitical Tensions and US Economic Data in Focus

Gold prices test multi-week lows amid geopolitical tensions and US economic data volatility. Retail sentiment suggests a potential further decline.

In the face of escalating geopolitical tensions and recent operational concerns in key shipping routes, gold (XAU/USD) is testing new multi-week lows. Despite ongoing unrest in the Red Sea, gold has failed to find substantial support, signaling a potential shift in market dynamics.

Over the weekend, Chinese state-owned shipping company Cosco suspended operations in the Red Sea, citing operational fears. This move followed Danish container shipping giant Maersk’s announcement that it would avoid Red Sea shipping routes due to continuous Houthi attacks. These developments, however, have yet to provide the expected boost to the precious metal.

Last Friday’s release of US job data triggered a wave of volatility. The Non-Farm Payroll (NFP) report’s surpassing of expectations caused a surge in the US dollar, prompting a reduction in rate expectations. However, the optimism was short-lived, as the subsequent US ISM Services report disappointed. The Services PMI dropped from 52.7 to 50.6, and the Employment reading plummeted from 50.7 to 43.3, pushing it deep into contraction territory.

This Thursday brings another crucial economic indicator with the release of the latest US inflation reading. Analysts expect core inflation to decrease year-on-year from 4.0% to 3.8%, while they foresee a marginal increase of 0.1% in headline inflation, bringing it to 3.2%.

Gold Prices: Geopolitical Tensions and US Economic Data in Focus

Gold has been experiencing a downward trend throughout the year, marked by consistent lower highs and lower lows. The precious metal trades below the 20-day simple moving average and previous horizontal support at $2,032 per ounce. The next significant support level is $2,014 per ounce (50-day simple moving average), followed by a prior swing high at $2,009 per ounce. A potential upward movement would bring attention to the $2,043 per ounce level, marked by the 20-day simple moving average and prior horizontal resistance.

Retail trader data indicates that 59.29% of traders are net-long, with the long-to-short ratio at 1.46 to 1. While net-long traders have increased by 6.29% compared to yesterday and 0.75% from last week, net-short traders have decreased by 0.97% from yesterday and 13.42% from last week.

Contrary to the crowd sentiment, where most traders are net-long, there is a suggestion that gold prices may continue to decline. Market observers emphasize the importance of monitoring IG Retail Trader data changes, which can impact sentiment and influence price action.

The current sentiment in the gold market is bearish, with approximately 60% of clients being net-long. There has been a daily increase of 12% and a weekly increase of 6% in long positions. In contrast, short positions have seen a daily uptick of 1% but a substantial weekly decrease of 11%. Open interest has experienced a daily rise of 8%, although a modest weekly decline of 2%. This data suggests a mixed and dynamic landscape, reflecting ongoing shifts in market participants’ positions and sentiments in the gold market.

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