Gold price looks weak here despite a recent bounce. The reaction on the gold market is likely driven by a decline in the USD rather than new developments on the gold market, which makes is sensible to the overall U.S. election process.
The bounce on the gold price came just in time for bulls. Because the series of higher lows and higher highs remains in place, many traders renewed their bets against the USD. But gold did not reach the apex of the running triangle that formed ahead of the all-time high above $2,000. Moreover, the price of gold broke from a triangle as a reversal pattern, and it did not reach the measured move.
Extreme USD Short Positioning Builds Up
Yesterday’s debate between the two candidates for the White House brought more confusion to traders. As a result, the USD did not shift drastically, as many expected.
However, the USD positioning did reach some extremes in the weeks prior to the debate. As it turns out, the USD speculators’ short positions reached a three-year high recently.
The risk here is that investors used the recent strength in the USD to build new short positions. But such extreme positioning runs the risk of a short squeeze, in which case the USD appreciation will come quicker and faster.
Gold Price Technical Analysis
The technical picture shows the bounce from the apex area, without actually reaching it. At this point, the gold price struggles at dynamic resistance, and the apex of the recent triangle should act as invalidation for any short trade.
Bears would want to see a move towards the $1,700 that confirms the triangle as a reversal pattern. To go for it, an entry at the market makes sense only with a stop-loss order at $1,950.