Gold prices have failed to retake key support levels and remain below former uptrends from 2019, 2020, and 2021. Fundamental conditions for gold are unfavorable in the near-term as US Treasury yields and real yields rise, acting as a headwind for gold. Technical indicators on daily, weekly, and monthly charts show gold in a bearish posture with momentum declining. While retail traders remain net-long, their positioning is less extreme than in previous weeks, suggesting the current downtrend in gold prices may soon reverse higher.

1. GOLD PRICE OUTLOOK

2. Points To Be Discussed Today:
• Gold Prices Failed To Retake
• Ugly Price Action Post-FOMC
• Gold Prices Have Unfavorable Fundamental Conditions
• Gold Volatility And Gold Prices’ Abnormal Relationship
• Gold Volatility Trading
• Gold Prices Remain Below Former Support
• XAU/USD Daily & Monthly Chart

3. Gold Prices Failed To Retake
• Gold prices failed to retake the uptrend from
the May 2019, March 2020, and March 2021
lows, and are nearing their monthly low.
• It remains the case that “selling the rally may
be the modus operandi henceforth.”
• According to the IG Client Sentiment Index,
gold prices surprisingly have a bullish bias in
the near-term.

4. Ugly Price Action Post-FOMC
• We’ve been ambivalent about rallies in gold
prices for the past several weeks.
• Just two days ago it was noted that “what’s
happening in gold prices is nothing more than a
‘dead cat bounce’…in recent Fed meetings and
moreover, minutes from those Fed meetings.
• Gold prices haven’t fared well as US policymakers
inch ever-closer towards making a stimulus taper
announcement.”

5. Gold Prices Have Unfavorable
Fundamental Conditions
• Price action in the 48-hours around the
September Fed meeting have vindicated this
apprehension towards the gold price rally that
marked the start of the week.
• Now that the FOMC has offered some more
clarity on its taper timeline and the tension
around China’s Evergrande, the country’s second
largest property developer, is being relieved.
• Gold prices have unfavorable fundamental
conditions in the near-term.

6. Gold’s Ascent Has Now Become A
Veritable Headwind
• In particular, now that US Treasury yields
are rising, which is translating into higher
US real yields (nominal yields less
inflation).
• One of the key factors that might have
otherwise supported gold’s ascent has
now become a veritable headwind.

7. Gold Volatility And Gold Prices’
Abnormal Relationship
• Historically, gold prices have a relationship with
volatility unlike other asset classes.
• While other asset classes like bonds and
stocks don’t like increased volatility – signaling
greater uncertainty around cash flows, dividends,
coupon payments, etc. – gold tends to benefit
during periods of higher volatility.
• Falling gold volatility and weak correlations
suggests continued difficult trading may be ahead
for gold prices.

8. GVZ (Gold Volatility) Technical Analysis: Daily Price
Chart (September 2020 To September 2021)

9. Gold Volatility Trading
• Gold volatility (as measured by the Cboe’s gold
volatility ETF, GVZ, which tracks the 1-month
implied volatility of gold as derived from the GLD
option chain) was trading at 16.37.
• The relationship between gold prices and gold
volatility remains abnormal.
• The 5-day correlation between GVZ and gold
prices is -0.27 while the 20-day correlation is -
0.71. One week ago, on September 16, the 5-day
correlation was -0.98 and the 20-day correlation
was -0.45.

10. Gold Price Rate Technical Analysis: Daily Chart
(August 2020 To September 2021)

11. Gold Prices Remain Below Former
Support
• Earlier this week it was noted that “even though a
rebound has transpired over the past 24-hours.
• Gold prices remain below former support in the
symmetrical triangle that encompassed price
action from January through July.
• And more recently have traded below the
ascending trendline from the May 2019, March
2020, and March 2021 lows.
• Further weakness cannot be ruled out at this
time.”

12. Gold Prices Remain Below
• Gold prices have since failed at these former
support levels, duly treating them as resistance
after what appeared to be a ‘dead cat bounce.’
• More losses may be on the way given the posture
of momentum indicators.
• Gold prices remain below their daily 5-, 8-, 13-,
and 21-EMA envelope, which is in bearish
sequential order.
• Daily MACD continues to decline while below its
signal line, and daily Slow Stochastics are pushing
back into oversold territory.

13. Gold Price Technical Analysis: Weekly Chart
(October 2015 To September 2021)

14. Gold Prices’ Technical Structure
• Gold prices’ technical structure on the weekly
timeframe has not improved by any stretch of the
imagination in the 48-hours around the
September Fed meeting.
• The weekly 4-, 13-, and 26-EMA envelope
continues to slide lower, while weekly MACD is
dropping further below its signal line.
• Weekly Slow Stochastics are accelerating lower
below their median line. It remains the case that
“selling the rally may be the modus operandi
henceforth.”

15. Gold Client Positioning

16. Retail Trader Data
• Retail trader data shows 74.85% of traders are
net-long with the ratio of traders long to short
at 2.98 to 1.
• The number of traders net-long is 1.67%
lower than yesterday and 4.40% lower from
last week, while the number of traders net-
short is 15.61% higher than yesterday and
58.37% higher from last week.

17. Gold Price Trend May Soon Reverse
Higher
• We typically take a contrarian view to crowd
sentiment, and the fact traders are net-long
suggests Gold prices may continue to fall.
• Yet traders are less net-long than yesterday
and compared with last week.
• Recent changes in sentiment warn that the
current Gold price trend may soon reverse
higher despite the fact traders remain net-
long.

18. XAU/USD Daily Chart

19. XAU/USD Monthly Chart

20. GOLD PRICE OUTLOOK

21. THANKS FOR LISTENING
GOLD PRICE OUTLOOK