Gold prices,on Friday, December 16, slid for the 6th consecutive week with the precious metal down 1.8% to trade at 1137 ahead of the New York close.
The losses come amid renewed strength in the greenback with the DXY climbing to fresh 14-year highs after the FOMC moved to raise interest rates for only the second time in 10years.
Although the rate-hike was widely anticipated, slight upward revisions to the Fed’s growth & inflation forecasts were overshadowed by and uptick in the committee’s interest rate dot plot with officials now calling for 3 hikes next year.
The release prompted a repricing off expectations, fuelling a massive rally in the U.S. dollar as lower yielding ‘haven’ assets like gold came under pressure.
A summary of the DailyFX Speculative Sentiment Index (SSI) shows traders are net long Gold- the ratio stands at +3.33 (77% of traders are long) – bearish reading. Long positions are 5.4% below levels seen last week while short positions rose 20.4% over the same period.
Market participation remains firm, with open interest at 4.9% above its monthly average. It’s important to note that SSI has continued to narrow from the 2016-extreme of +3.59 and highlights the threat of near-term exhaustion in sentiment / price. That said, the recent pullback in SSI suggests that the immediate downside bias is at risk as price approaches critical support.
Gold prices tested a critical support barrier this week at 1120/30 – this region is defined by the 161.8% extension of the decline off the yearly highs, the 76.4% retracement of the advance off the 2015 low, the 2014 low and the lower parallel of the embedded descending parallel formation.
A break lower from here risks substantial losses for bullion with such a scenario targeting the lower parallel extending off the 2015 low ~1095 backed closely by the 2015 low-week close / 88.6% retracement at 1083/85 and the yearly open at 1062, DailyFx.com reports.
