Gold Trades Price Heavy on Fed Outlook- Prices Holding Uptrend Support

London (Feb 24)  Gold prices are lower this week with the precious metal off by more than 1.3% to trade at 1328 ahead of the New York close on Friday. The move is on pace to mark the largest weekly decline this year and comes on the back of a rebound in the greenback. Despite the declines however, price has continued to consolidate within the broader January range. 

Minutes from the latest FOMC policy meeting released this week suggests Fed officials see an “increased likelihood” for “further” interest-rate increases this year. Higher rates tend to weigh on demand for non-yielding assets like gold but losses have been limited as the outlook for inflation continues to build. While the fundamental picture remains clouded by these opposing forces, the broader technical picture remains clear and for now, the pullback remains within the confines of longer-term uptrend. 

Looking ahead to next week the focus will be on the second read on U.S. 4Q GDP figures with consensus estimates calling for a downward revision to an annualized 2.5% q/q from 2.6 q/q. For gold, prices may yet have lower to go but we’re generally on the lookout for support heading into the March open. 

Gold Trades Heavy on Fed Outlook- Prices Holding Uptrend SupportGold Trades Heavy on Fed Outlook- Prices Holding Uptrend Support

Gold Trades Heavy on Fed Outlook- Prices Holding Uptrend Support • A summary of IG Client Sentimentshows traders are net-long Gold - the ratio stands at +1.9 (65.5% of traders are long)- bearish reading

• Long positions are 0.8% lower than yesterday and 2.5% higher from last week

• Short positions are 0.6% higher than yesterday and 13.8% lower from last week

• We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Spot Gold prices may continue to fall. However retail traders are less net-long than yesterday but more net-long from last week and the combination of current positioning and recent changes gives us a further mixed Spot Gold trading bias from a sentiment standpoint.

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