Gold prices are currently locked in a tight consolidation phase as the elusive $2000 per ounce level remains out of reach despite a weakening US Dollar. Despite the ongoing uncertainties in the Middle East, optimism surrounding a potential resolution seems to be suppressing the safe-haven appeal of the precious metal. The recent increase in the Fear and Greed index from 30 to 42 indicates a shift in market sentiment away from fear, possibly contributing to gold’s struggle to make significant gains.
An analysis suggests that Gold’s support is likely to persist, especially with the weakening US Dollar providing a solid foundation for the metal’s prices. However, for a sustained breakthrough above the $2000 mark, a continued decline in US data is deemed necessary to solidify the perception that the Federal Reserve’s policy stance is settled. Such a development, though favoring risk assets, could potentially drive gold prices higher.
On the downside, the improving market sentiment and growing risk appetite may push gold towards a deeper retracement, potentially down to $1950. Furthermore, the existence of a price gap far below the current levels, resting at $1843/oz, remains a long-term prospect that may take a considerable amount of time to close.
In the coming days, market participants await key speeches from Federal Reserve policymakers, including remarks from Fed Chair Powell on Wednesday and Thursday. While no surprises are anticipated, the market will closely monitor any indications that the Fed might not be finished with rate hikes, as highlighted by Fed policymaker Thomas Barkin, who emphasized the need for caution until two more inflation reports are released before the December meeting.
From a technical standpoint, gold needs to maintain support above the $1977-1980 area on the daily timeframe to sustain its bullish momentum. Despite the repeated failed attempts to breach the $2000/oz mark, the overall bullish structure remains intact, with the moving averages hinting at a potential golden cross pattern, suggesting further upward momentum.
The silver market mirrors gold’s price action, with a potential double top pattern and a current stall at the resistance level of $23.18. However, the 20-day moving average poised to break above the 50-day moving average might signal a potential continuation of the upside rally.
Looking at the IG Client Sentiment, retail traders are predominantly holding long positions, with 87% bullish on silver. However, considering the contrarian view to crowd sentiment adopted at DailyFX, this overwhelmingly positive sentiment among retail traders might suggest a potential downtrend for silver in the upcoming days.