Anxieties around the trade war started to impact the sentiment and this triggered the profit warning by Wall Street analysts. On top of this, we also had the IMF coming out with a downward revision of the global economic growth
The precious metal, gold is back under the spotlight because of the renewed appetite amidst traders. This is primarily because of the rising geopolitical tensions and worries over the slowing global economic growth. The gold price has traded near a two-and-a-half month peak last week and the price is trading at $1,227 at the time of writing this report. Year to date, the price is down nearly 5.18%.
At the start of this year, the gold price was trading near the $1,350 and hit the highest point of $1,366 on January 25th, 2018. Not many on the street were expecting the Fed to be aggressive towards their monetary policy. However, the strength in the economic data and robust growth in the US economy made the Fed to fine-tune their monetary policy. The hawkish stance by the Fed towards their monetary policy pushed the dollar index higher and this triggered the sell-off in gold.
In other words, since January, the price of gold has been out of luck and we have seen one clear trend- a downward move. On August 16th, 2018, the yellow metal’s price made a low of $1,160 but since then we have seen some serious changes in the price action because of the change in the underlying fundamentals. Anxieties around the trade war started to impact the sentiment and this triggered the profit warning by Wall Street analysts. On top of this, we also had the IMF coming out with a downward revision of the global economic growth. The bearish sentiment since then has picked strength and more and more hedge fund analysts have started to believe that there are more chances for the markets to face serious correction than a bull run.
On top of this, heightened geopolitical tensions between Saudi Arabia and the West over the killing of journalist Jamal Khashoggi has put off traders to load up any major risk on bets in their portfolio. The situation is serious and this has brought the special relation between Donald Trump and Saudi Crown Prince Mohammed Bin Salman under the spotlight. These geopolitical tensions are further anchored when we look at the mess created by Theresa May over Brexit. Italian budget woes just add the cherry on top. Simply put, the geopolitical tensions have started to make investors seriously worried about their portfolios and if we factor in the growth concerns over in China in the same equation, it becomes clear why the speculators have started to scale back from their short positions.
The recent CFTC data showed that hedge funds have decided that it is about time for them to start scaling back from their short position. This sends a strong bullish signal for the metal. This capitulation factor could actually intensify even further if the Fed has change of heart about their hawkish monetary policy. After all, Donald Trump has criticised the Fed several time about hiking the interest rate so many times this year. It is important to emphasize that back in 2015, when speculators had net long positions, it triggered a 30% move in the gold price. A similar move would help the price to move to $1,500.
Another interesting element which is equally important to mention here is that the gold price has been gaining traction while the dollar index maintained its strength. During the past few weeks, we have seen a positive correlation between the dollar index and the gold price. This shows that gold price has become immune to rise in the dollar index. This simply means if we see any kind of pullback in the dollar index, the odds are higher for a mammoth move in the gold price. 
