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Forex Deep Dive: XAU/USD (Gold) Analysis

GOLD- XAU/USD

Fundamental Analysis

This precious metal is considered the safe-haven of the investing world. When fait money like the USD falls in value, it's likely that investors switch up their trading mindset and place bets on gold. And, according to sources on COT reports, big money is switching up their positions a bit and increasing their stake in gold.

COT Reports

Total contracts are at 89.4% long, 53% are non-commercial who are long as well. Similar to the Aussie analysis I wrote last week, there is an overall bullish bias on gold without even looking at retail sentiment just yet. What matters is where these big institutions are placing their money right now, and last week showed them moving into the Buck and gold. Total open interest in the metal saw a +2,596 increase last week which is a good sign that big money is still continuing to put more and more into gold throughout the past couple weeks.

Treasury Yields and Inflation

Bond yields climbed to a high 1.7% last week marking an alarming rise in yield as well as the rate in which it is rising. Although this yield rate doesn't look too concerning, it could be a threat to the price and demand of gold. If yields continue to rise like this, big money might just move over to more bonds, hurting the stock market as well.

Powell also suggested in his statement last week that the Fed will let keep letting inflation climb if need be. They will also let the Supplementary Leverage Ratio expire on March 31, which I think basically means that the Fed will have to hold more capital and have to limit their assets. This is definitely something to look at for the weeks ahead to see what this could do to gold and the stock market as well.

Technical Analysis

Gold 1D chart

On the daily chart, gold is still struggling to break out of that heavy resistance level around the 1740s, but continues to test it. Mid-2020 lows proved to be a considerable zone of support which is a good sign for bulls as price hovers in between heavy support and resistance. This level could be a key area to break if we are looking for a major breakout. The 1740s level should be significant enough to cause serious momentum to the upside upon a break.

Retail Sentiment

Right now, 57% of retail traders are long gold showing a majority that are bullish.

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