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Gold price forecast: XAU/USD breaks lower, will it hold before the weekend starts?

Gold prices extended losses over the past 24 hours as weekend nears; the yellow metal is eyeing University of Michigan Sentiment ahead and this is as XAU/USD broke under a key rising trendline from August.

Gold prices weakened over the past 24 hours, extending a downtrend that has its beginnings in late February. The anti-fiat yellow metal remained under the pressure of a stronger US dollar , which continued to capitalize on this week’s hotter-than-expected US inflation report.

The reality of tightening monetary conditions around the world is working against the yellow metal, which bears no inherent yield from holding the asset. It is also widely priced in the greenback across the globe, making it quite sensitive to an increasingly hawkish Federal Reserve.

Over the remaining 24 hours, XAU/USD is eyeing University of Michigan Sentiment data. The survey is expected to clock in at 64.0 versus 65.2 prior. One-year inflation expectations are anticipated to rise though to 5.5% from 5.4% prior. The latter could keep the central bank on its toes for the time being.

Gold technical analysis

On the daily chart, the yellow metal has broken under a rising trendline from the beginning of August. Further downside confirmation could spell trouble for gold. Keep a close eye on immediate support, which seems to be the 100% Fibonacci extension at 1818. On the other hand, pushing back above the trendline would place the focus on the 20-day Simple Moving Average.

XAU/USD daily chart

Gold IG Client Sentiment analysis – bearish

Looking at IG Client Sentiment (IGCS), about 84% of retail traders remain net-long gold. IGCS tends to function as a contrarian indicator. As such, overall positioning is hinting at further losses. This is as downside exposure decreased by 7.03% and 9.59% respectively. With that in mind, the combination of current and recent changes in positioning is offering a stronger bearish contrarian trading bias.

*IGCS data used from May 12th report


This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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