Português
Español
русский
The price of gold remains volatile on the metals market as the short-term trend for the yellow metal appears increasingly uncertain. Traditionally, the price of gold receives a boost over the Lunar New Year holiday period, but that is not currently the case as the metal is currently on course for its second consecutive monthly loss.
Another concern is how gold is starting to decouple from seasonality. Based on historical data spanning twenty-five years, January is usually the second strongest month of the year for gold. However, last month the price of gold lost 2.73 percent, well under its average January performance of +1.4 percent.
If we look more deeply at the twenty-five-year performance of gold, the yellow-metal is moving towards a period of seasonal weakness. March is typically the worst performing month for gold, with a -0.8 percent loss.
According to the same historical data the price of gold does not really start to positively benefit from seasonality again until the summer months. April, May, and June are usually dull times for the metal in terms of performance.
If we factor in the recent heavy rejections from the $1,900 and $1,860 areas since the start of the year it could be a fair assumption that the price of gold could be heading lower before it starts to move higher again.
This may be beneficial for traders and investors as well. As the price of gold could start to approach some relatively attractive levels below the $1,800 level. Many analysts speculate that the sweet spot for gold longs could be around the $1,730 to $1,685 area over the coming weeks and months.
Source by ActivTrader.
It is certainly a concern that the price of gold has failed to rally through the Lunar New Year, and even the lead up to this holiday. Due to traditions of gold gift giving and hoarding in many Asian nations, especially China, the price of gold usually rises during this period.
From a fundamental perspective the prospect of more stimulus from the Biden administration has failed to propel the price of gold above the $2,000 level. Perhaps gold bulls are waiting for more QE, or a better vantage point below $1,800 to enter into the prevailing uptrend.
The ActivTrader Market Sentiment tool shows that traders are becoming more bullish towards the price of gold. Traders have been on the wrong side of the market move since the middle of last week.
Although the sentiment skew is not overwhelmingly or too one-sided, we should still keep an eye on sentiment towards gold, especially if traders are still betting on higher price and we see a strong decline under the $1,800 support area.
Aside from sentiment and seasonality we should also pay attention to the US dollar index. The price of gold has an inverse correlation with the price US dollar. If the greenback continues to breakdown against most major currencies, but gold price remains under pressure, then this a negative short-term development for gold.
