Dollar Retreat Continues To Support Gold Prices, Long Positions Cut Again

The weaker dollar tone has continued to support gold prices with additional support from a move back above the 200-day moving average while long positions have been cut further.

Gold prices maintained a firm tone late in the US session on Friday as the dollar remained under pressure following weaker than expected data.

Bond yields in the US and Europe did, however, recover from their lowest levels which lessened gold support to some extent and there was resistance above the $1,230 per ounce level.

The latest COT data recorded a further decline in long, non-commercial gold positions to just above 60,000 contracts from close to 94,000 the previous week.

This was the fifth successive weekly decline in long positions and overall longs were at the lowest level since January 2016.

The continued decline in long positions illustrates the underlying shift in market sentiment, but will also lessen the risk of further long liquidation in the short term which should help to underpin prices.

Dollar weakness continued to be the principal feature during European trading on Monday with the dollar index dipping lower again after a brief recovery above the 95.00 level.

Global bond yields also moved lower which provided some net support to precious metals and gold edged towards the $1,235 per ounce area with a break above the 200-day moving average also encouraging some renewed buying interest.

The New York Empire manufacturing index came in below expectations, although there was little overall impact.

Trends in the dollar and bond yields will dominate gold in the short term with overall buying support liable to fade ahead with caution ahead of Thursday’s ECB policy meeting.

Gold Prices 4-Hour Chart

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Tim is a contributing author to EconomicCalendar.com. He is an economist and has been involved in financial markets for over 20 years as an analyst. He specialises in global economic trends, macro policy and central banks. Extensive knowledge, experience and data mining is used to anticipate trends in equities, bonds and forex with a contrarian slant. He is a graduate of the University of York with a degree in Economics/Econometrics.