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Gold Price (XAU/USD) – Struggle Continues in Low Volatility Conditions


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Gold Price (XAU/USD), Chart, and Analysis

  • Gold remains quiet ahead of the Christmas period.
  • Traders cutting back their short positions.

Gold Price (XAU/USD) – Struggle Continues in Low Volatility Conditions

How to Manage the Emotions of Trading

Gold traders are unlikely to see a pick-up in volatility ahead of the Christmas slow down as short-term support and resistance levels remain in play. Recent bursts of volatility in other risk markets have not been reflected in the gold market, and this is likely to remain the case for the near term. Gold is stuck in a month-old range between $1,763/oz. and $1,815/oz. apart from the sharp sell-off and rebound on December 15, and with very little on the horizon to prompt the precious metal to re-test these levels, gold looks set to crab sideways going into next year.

The Average True Range Indicator highlights the lack of price action seen in the precious metal recently with the indicator at a multi-month low of around $17. The CCI indicator shows gold moving back towards range and out of overbought territory, while the three simple moving averages are currently giving very little away.

The IG sentiment indicator – see below – shows retail traders trimming their net-short positions recently, leaving the market reading further net-long, a bearish contrarian market indicator.


Gold Price (XAU/USD) – Struggle Continues in Low Volatility Conditions

Retail trader data show 80.60% of traders are net-long with the ratio of traders long to short at 4.16 to 1. The number of traders net-long is 3.31% higher than yesterday and 5.82% lower from last week, while the number of traders net-short is 11.17% lower than yesterday and 13.99% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Gold prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger Gold-bearish contrarian trading bias.

What is your view on Gold – bullish or bearish?

By Nick Cawley, Strategist, 21st December 2021. DailyFX

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