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Gold To $2000, Yen Geared For Downside

March 30, 2023
Frank Cabibi

Unemployment claims came in higher than expected this morning. Forecast was (196K), Previous was (191K), and Actual was (198K). Although this was an indication of a slowing economy, markets acted antithetically. SPX500 is up 0.52%, DXY is down 0.51%. However, gold is the only asset reacting accordingly to the news. Here is a snapshot of what we can expect from gold going forward.

EdgeFinder Analysis

UJ is now a neutral rating (+2) from +6 on March 9. This could be an indication of another shift in momentum. Price has been on a downtrend for a few weeks which is keeping the EdgeFinder's score from entering into the buy zone.

The yen is the most shorted asset in the market right now, according to COT reports. This is a considerable indication that the pair is still bullish. The majority of retail is behaving oppositely from smart money. On the other hand, dollar bullishness is under some pressure now that the Fed projects only one more rate hike this year.

Gold continues to rise on recent news regarding US job numbers. A higher number of unemployed in the US could probably be fueling the metal's bullish run. Price touched above $2000 and entered a flag pattern as investors took profits. Now it appears the metal is heading back towards the recent highs around $1996-2010.

Although gold isn't quite a strong buy on the EdgeFinder, it happens to be our strongest buy rating right now. With a score of +5, gold is beating the USD in most categories, excluding the interest rate and inflation category.

AUDNZD is still one of our strongest sells on the EdgeFinder. Even though smart money is equally bearish on both currencies, the score is still -6. The two are very similar currencies, so the fact that there is a strong bias to the downside from our market scanner is a big warning to the bulls.

Next month is historically the most bullish month which is also something to consider. Without keeping entries in mind, the pair has gained the most in April than any other month. However, projections suggest a move towards 1.06584 in the medium term.

Retail Spotlight

Retail is largely buying USD while shorting JPY and gold. After a recent dollar sell off, the crowd is finally getting into the dollar, of which they were mostly short. Yen is short bias from both the crowd and smart money making it the weakest currency as of now.

Smart Money Spotlight

This table shows the latest change of smart money positions each week. Last Friday, the smart money tracker reported an increase in gold longs and decrease in shorts. There was also a decrease in SPX500 longs and increase in shorts. US 10-Year bonds got dropped by a lot of investors while shorts were picked up too. Those were the biggest positional changes.

Fundamental Spotlight

USD GDP slightly dropped from 2.8-2.6% in this report for last quarter. Australia saw positive change in Q4 while New Zealand saw a decline. The Japanese economy remains stagnant for the time being. Investors may have mixed sentiment regarding US GDP because of a contraction in growth but a positive change in growth rate overall.

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