Hedge funds’ bullish bets on gold jump to four-year high
Hedge funds and other large speculators boosted their net-long position in gold.
While the gold price slid below $1,300 an ounce on Monday, the metal’s 7.5% gain this year has been into the teeth of a rampant US dollar. Gold and the dollar usually move in opposite directions.
On Monday, the greenback hit fresh 12-year highs against the currencies of major US trading partners, with the dollar index topping 95. Since August 18, the last time gold traded above $1,300 an ounce, the USD has strengthened by 13%.
The US dollar index record high of 164.72 reached in February 1985 coincided with the bottom in the price of gold of $284.25 an ounce during that same month.
InvesTRAC passed on this price graph to MINING.com which attempts to answer a question that’s been on gold and FX traders’ mind ever since the USD bull run began in earnest mid-2014:
The US dollar can’t keep going up, can it? Many analysts are finding it hard to comprehend the continued dollar strength. After all the US is a basket case situation they say.
Yes, but the rest are worse basket cases. Have a look at InvesTRAC’s monthly chart of its USD index showing 45 years of history with today’s levels used as a January month end close.
Clearly the rise off a 12 year base is meaningful and suggests that there is huge upside potential in the long term. The next visible resistance is 15 percent higher which level may not be reached in the short term given the overbought nature of the current rise.
Interesting to see that there is an apparent 84 month cycle which produced 4 lows and then 2 highs and it seems that in the first half of 2016 there could be another high.
Source: InvesTRAC
