FxWirePro: Delta risk reversal does not favor XAU/USD sentiments but technical does

From the above table one can observe the delta risk reversal has maintained its red zone with higher volatility as well. Delta risk reversal of ATM gold contracts is gradually rising into negative despite their prices showing strength soon after fed's rate decision. We interpret this negative delta risk reversal as costlier hedging sentiments for downside risks.

On the flip side, technicals shows that gold was fallen to five and half years lows but held its strong support zone of $1,071.28 levels on 20th July despite of the Fed's speculation then. Since then we had already mentioned the prices to have rebound and it has approximately shown 3% consolidation. Rest all is history now, gold prices have been consistently rising from then to hold near a three-weeks high as China's surprise move to devalue its currency fanned Federal Reserve's delay raising interest rates until the very end of 2015. The current gold prices are well above moving average curve as shown in the above chart, while both RSI and stochastic curves are moving convergence with price spikes.

Further the positions constructed for bull overview will increase in value with time decay. But for now rate hike decision is deferred to the next 2 meetings of FOMC that are due before this December and what do you think can be the impact on gold?

After this short term price recoveries, negative delta risk reversal numbers as shown in the nutshell suggests downside hedging has been relatively expensive which means anticipation of gold prices to fall but technical chart makes us to have quite dubious eyes on either earlier short term bull run or this just a consolidation or trend reversal. To be on a safer side our belief is to follow the long term trend as the delta risk reversal suits this trend analysis. Long term charts still suggests consolidation but certainly cannot be deemed as trend reversal.