Gold Rose as Qatar Turmoil Puts Market on Edge

ACY Australia

Gold prices run a bullish market for almost a month while there was little change yesterday on Monday after a surge the previous day. Gold keeps climbing on todayâ€™s trading to as high as $1281.10 as of 11:00 a.m. in Sydney amid the relation cutoff between Qatar and some other Arab countries, which raised investorsâ€™ risk aversion.
On Monday Saudi Arabia, the United Arab Emirates, Egypt and Bahrain cut off most diplomatic and economic ties to Qatar in an unprecedented move, including closing transport links with top liquefied natural gas (LNG) and condensate shipper Qatar, designed to punish one of the regionâ€™s financial superpowers for its ties with Iran and Islamist groups which undermines regional stability.
The news about Qatar turmoil which led to geopolitical fears rippled through the market, coupled with a weekend terror attack in London tend to push gold prices up as investors are looking for some risk-protection commodities.
The U.S dollar index continues to decline and remains in a bearish run which started from the beginning of this year. Itâ€™s already broken lower to the yearly low to 96.570, increasing the possibility of its continuous downturn. As Non-Farm Payrolls and ISM Services and Non-Manufacturing Composite (May) came-in below expectations, the economic weakness in U.S. would push the dollar down further although the unemployment rate figure stayed close to forecast.
Looking at the daily technical graph of USD Index, it already broke to the record low since November 10 last year after the breakout of the descending channel for the past few months, whose the lower channel is viewed as a key resistance. Prospects for U.S. dollar likely continues current momentum revealed by the downward MACD and Relative Strength Index (RSI) shown below.

Chart 1: USD Index Daily
Back to the movement of gold prices, it is consolidating in a developing ascending price channel with a strong RSI. In the event that it keeps the momentum, a resistance found at April 16â€™s high will be the first obstacle for its increase. Alternatively if prices reverse lower, a support level will be found at 60-day moving average (MA60).

Chart 2: XAUUSD Daily
Going into the 30-minute chart, it just broke higher from the intensive trading area. If prices will not reverse lower and back to the horizontal channel, traders may watch for a long position in gold in the near term.

Chart 3: XAUUSD 30-Minute
Sentiment totals for gold prices are currently positive, with 69.6 percent of traders are net-long with the ratio of traders long to short at 2.29 to1. The number of traders net-long is 9.6 percent in a descending momentum while the number of traders net-short is running in an upward trend. When sentiment is read as a contrarian indicator, the positive value suggests a bearish bias for gold prices.

Chart 4: Spot Gold Client Positioning

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