Hedge funds increased the downward trend in the gold market. Accordingly, their speculative position has approached neutral. Therefore, the sentiment in the gold market quickly turned negative. Meanwhile, allegations of JP Morgan traders manipulating the gold market are on the agenda. Analysts interpret the market and share their forecasts.
Phillip Streible: Not much room for gold price to drop
However, some analysts are optimistic that the increasing bearish trend in the market may signal a capitulation move and prices may be near the bottom. Phillip Streible, chief market strategist for Blue Line Futures, comments:
Last week’s sale helped attract many satisfied investors from gold. A lot of fat has been cut and only lean longs remain. There isn’t much room for the gold to drop.
Gold’s net position declined
The CFTC’s Commitments of Traders report for the week ended July 5 showed money managers cut their speculative gross long positions in Comex gold futures to 103,472 with 7,378 contracts. At the same time, short positions increased by 11,690 contracts to 86,438.
Gold’s net position is now 17,034 contracts, down more than 52% from the previous week. Also, gold’s net position is at a three-year low. During the survey period, gold prices fell below critical support levels. Finally, the yellow metal tested the long-term support at $1,730.
US dollar has been a phenomenal headwind for gold
cryptocoin.comAs you can follow, gold prices fell 3% during the survey period. Meanwhile, expectations are for the Fed to raise interest rates by another 75 basis points at the end of this month. Analysts state that gold will suffer from this.
The aggressive monetary policy stance of the central bank boosted the US dollar. It pushes breakeven levels. The difference between nominal and real returns is now less. Specifically, the US dollar is trading at a 20-year high. This was also an extraordinary headwind for gold.
“Yellow metal continues to be more bearish”
Some analysts say that gold continues to hold relatively well in the current environment. However, other analysts do not rule out the possibility of further declines. TD Securities analysts interpret the current situation as follows:
We are seeing evidence that the fastest exits from large commodity funds since the Covid-19 crisis could trigger a series of successive liquidations from various speculative groups. This is especially relevant for gold prices, given the over-inflated positions left by private traders in the gold markets.
The significant size this group has accumulated during the pandemic stands indifferent to a resolute hawkish Fed, according to analysts. Analysts note that in a liquidation vacuum, these positions are now vulnerable. Therefore, according to analysts, the yellow metal continues to be even more bearish.
JP Morgan traders accused of manipulating gold market
The jurors were told that JP Morgan had been robbing the gold and silver markets for years. Lucy Jennings, a prosecutor with the Department of Justice’s fraud division, explained:
This case is about a criminal conspiracy at one of Wall Street’s biggest banks. They decided to cheat to earn more money for themselves.
Three former JPM employees are in the line of fire, including Michael Nowak, senior head of precious metals, gold trader Gregg Smith, and Jeffrey Ruffo, an executive director specializing in hedge fund sales. The prosecution charges them all with conspiracy to commit price manipulation, electronic fraud, commodity fraud and fraud from 2008 to 2016.
This is not the only high-profile case recently. Two former precious metals traders at BofA’s Merrill Lynch company were found guilty of forgery by a jury in Chicago last year. Two Deutsche Bank AG traders were convicted in 2020. In September 2019, JPMorgan admitted it was wrong. It has agreed to pay more than $920 million to settle US allegations of market manipulation in both precious metals and Treasuries.
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