Yahoo Finance Price of Gold Fundamental Daily Forecast – Short-Squeeze Should Drive Prices into $1205.90 – $1215.10
Gold futures are edging higher early Monday, following through to the upside after posting a strong reversal last Thursday. Last week, buyers came in at $1167.10, slightly above the December 22, 2016 main bottom at $1166.60 and the December 16, 2016 main bottom at $1162.00.
The price action suggests that weak short-sellers are scrambling to get out of profitable positions and may be willing to pay anything to protect those gains. If the current upside momentum continues then we could see a move into $1215.10 to $1205.90 over the near-term. A move into this area is likely to attract new short-sellers.
At 0736 GMT, December Comex Gold futures are trading $1193.40, up $9.20 or +0.79%.
A psychological game is playing on the minds of the short-sellers. Given the plethora of bearish fundamental news this year, they have built sizable profitable positions. Their worry at this time is giving back most of those gains. Speculative buyers may have shaken them up last week, which means they may panic if support continues to come into the market. This panic buying could spike prices into the retracement zone target at $1205.90 to $1215.10.
The fundamentals may not change this week, but the tone of the market will be driven by trading momentum. The headlines will talk about an easing of trade tensions between the United States and China, but professional traders are really concerned about giving back profits especially after last week’s spike to the downside appears to have been a gift to the short-sellers.
Value-buying is another factor supporting prices. Keep in mind that gold is no longer a store of value, it is a financial asset. And when assets get relatively cheap then speculative investors buy them. This may have been the case last week.
In other news, hedge funds and money managers increased their net short position in COMEX gold contracts for the sixth straight week to another record in the week to August 14, data showed on Friday. Additionally, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund (ETF), fell 0.15 percent to 772.24 tonnes on Friday from Thursday.
Forecast
The CFTC report is stale data. It is as of August 14. The massive move in gold from $1167.10 to today’s high at $1195.30, started on August 16. It is highly likely that the rally is being fueled by aggressive short-covering. Therefore, we expect the next report to show a decline in the number of open short positions.
The CFTC data along with the liquidation in the SPDR Gold Trust market could be indications that gold is due for a turnaround due to oversold conditions.
If the dollar weakens this week then look for gold to spike into at least $1205.90 to $1215.10. Don’t be surprised if short-sellers get squeezed enough to drive this market higher this week.
This article was originally posted on FX Empire
