Fed tests gold upleg
Gold’s outlook and fundamentals remain really bullish.
On Tuesday, gold built on a rally kicked off on Friday after weak US economic news supported the argument that the US Federal Reserve will continue to hold off on raising interest rates.
In late afternoon dealings on the Comex market in New York, gold futures with December delivery dates were trading up nearly $10 or 1% at $1,146.80 after earlier in the day briefly scaling $1,150 an ounce.
The last time gold was above the $1,150 resistance level was September 24. Gold is up 4% from where it was trading before the Fed’s hold on rates which have not been raised since June 2006.
After US Labor Department Statistics on Friday showed only 142,000 jobs were created in September, well below analyst estimates of 205,000, new life was breathed into gold’s post-Fed rally.
The dollar and gold, and bond yields and gold, have strong negative correlations and on Tuesday the greenback fell to a three week low against the currencies of its major trading partners while treasury yields fell across the board.
Hedge funds were wrong-footed by the decision to keep interest rates near zero reducing bullish bets to more than five year lows ahead of the Fed decision.
But sentiment has now turned and according to the CFTC’s weekly Commitment of Traders data for the week to September 29 large speculators on Comex – referred to as “managed money” – doubled net bullish positions from the week before.
Speculators also significantly cut back on short positions – bets that gold could be bought cheaper in the future – reducing overall positions to 7.5 million ounces, down from record highs above 11 million ounces set in July.
In late July and early August, hedge funds entered bearish positions not seen since at least 2006, when the Commodity Futures Trading Commission first began tracking the data.
Image by Generation Grundeinkommen
2 Comments
Gene Byrge
When will everyone figure out that the governments maneuvers are CALCULATED to keep everyone except the insiders “wrong-footed” That way the entire coterie of “friends of the administration” can be informed what is going to occur BEFORE they release information. So the whole of Washington is now one big insider trading scam. Welcome to your Administration!
Anon-Y-Mous-e
From my trading desk:
Gold reached our first short term downside target of 1107 before it bounced again
Since Gold closed above 1123, it is back on a buy signal
However, since not all short term cycles have bottomed yet, we continue to be cautious, and stand on the sidelines
A close above 1165 is needed to confirm more upside
Smart investor $ is long precious metals and weighting the gold:silver ratio in favor of silver, that way they are always exposed to PM and can still make $. This article is contradictory for bullishness as history tells us low short positions is negative for bullishness, and high short positions are bullish. Also here is a good long play… New gold producer to take center stage in 2016, they acquired mill for 1/20th of replacement value yesterday and have an orphaned high-grade gold mine that was brought up to flipping the switch in the 80’s nearby that will be source of ore, and there is no further dilution as they are fully-financed; see http://www.miningmarketwatch.net/dvn.htm online.