XAU/USD, XAG/USD PRICE FORECAST:
MOST READ: US Dollar Forecast: DXY Poised to Extend Rally Despite Suggestions the Fed May be Done
Gold remained on the front foot in the Asian session before a pullback this morning following the European open. The precious metal is attempting to reclaim the $1950 handle as commodities eye gains on expectations that the US Federal Reserve may be done with rate hikes. Silver on the other hand failed to capitalize on recent developments as it approaches a key area of support around the 23.50-24.00 mark.
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FED RATE HIKE AND CHINA DEVELOPMENTS
Markets have seen a rather positive start to the week following Fridays US data as well as some developments overnight from China. Chinese newspapers reported a jump in real estate transactions in Beijing and Shanghai over the weekend after the cuts to mortgage rates and downpayment ratios while the Central Government also approved the setup of a special bureau within the NDRC for development of the private economy. This coupled with expectations for more stimulus and news that embattled property developer Country Garden won approval from its creditors to extend payments for an onshore private bond have all helped market sentiment at the start of the week. The question is, will the optimism last?
The US data on Friday appeared to be perfect for market participants as it kept the idea of Fed Rate hikes at bay while seeing a reduction in fears of a US recession. The downtick in rate hike expectations is likely to weigh on US treasuries as well which could keep Gold prices moving forward for now.
A subdued day from a data perspective as the US enjoys a bank holiday. The rest of the week as well does not offer a lot in terms of US data except the ISM Services number due later in the week. The lack of high impact US data this week could see Gold being driven largely by overall sentiment once more as further developments around China likely to set the tone.
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SILVER TECHNICAL OUTLOOK
Silver last week ran into a key confluence area around the psychological 25.00 mark. Silver is on course for a fourth successive day of losses but there remains a host of support just below the current price. We have also had a golden cross pattern as the 20-day MA crossed above the 200-day MA and could hint at another upside rally off support. Immediate support rests at the 100-day MA around 23.91, 23.61 and of course the 23.41 mark.
Silver is also trading within a triangle pattern which could see a selloff to retest the lower end of the triangle pattern and a retest of the ascending trendline. However, at present I am looking toward further upside pending a pullback which could also be driven in large part by developments around the Dollar Index (DXY).
Silver (XAG/USD) Daily Chart – September 4, 2023
Source: TradingView, Chart Prepared by Zain Vawda
GOLD TECHNICAL OUTLOOK
Form a technical perspective, Gold prices have made an impressive run toward the 100-day MA which rests just above a key resistance area around $1950. A break of the $1950 handle and the 100-day MA which rests around the $1953.6 mark is needed for the bullish momentum to continue with bears likely to retain interest should such a break not materialize. The precious metal is trading between the 50 and 100-day MAs.
Alternatively, a move lower from here faces initial support around the $1940 handle before focus turns to the 50-day MA around the $1931.5. The range breakout ($1926-$1930) which occurred last week Tuesday is yet to retested and could serve as a key area of support should the precious metal struggle to push higher.
As mentioned earlier I do expect the key drivers for Gold prices this week to be the Dollar Index (DXY) and the continuing developments around China. A continued improvement on sentiment could weigh on the US Dollar and drag US yields lower which in theory could propel gold prices beyond the $1950 handle.
Gold (XAU/USD) Daily Chart – September 4, 2023
Source: TradingView, Chart Prepared by Zain Vawda
IG CLIENT SENTIMENT
Taking a quick look at the IG Client Sentiment, Retail Traders are Overwhelmingly Long on Gold and Silver. 67% of retail traders are currently LONG on Gold while 80% are LONG on Silver. Given the Contrarian View to Crowd Sentiment Adopted Here at DailyFX, is this a sign that Gold and Silver may fall?
For a more in-depth look at GOLD and SILVER client sentiment and changes in long and short positioning download the free guide below.
| Change in | Longs | Shorts | OI |
| Daily | 1% | 14% | 5% |
| Weekly | -19% | 40% | -6% |
| Change in | Longs | Shorts | OI |
| Daily | 2% | -1% | 1% |
| Weekly | -5% | 14% | -2% |
Written by: Zain Vawda, Markets Writer for DailyFX.com
Contact and follow Zain on Twitter: @zvawda