Gold prices fell to their lowest level in seven months earlier in the month. Analysts were warning at the time that the gold market was ripe for a ‘short squeeze’ rally. They were also proven right as recent trading data from the Commodity Futures Trading Commission (CFTC) showed significant shorting in gold.
Gold went on a rally due to the short squeeze effect, but…
The CFTC’s disaggregated Commitments of Traders report for the week ending Oct. 17 showed money managers increased their speculative gross long positions in Comex gold futures by 10,774 contracts to 104,708. At the same time, short positions decreased by 31,096 contracts to 89,605.
After two weeks of net short positioning, speculative positions rose sharply. Thus, it turned into a net long position of 15,103 contracts. During the survey period, short squeezes pushed gold prices to the initial resistance level of $1,900. Commodity analysts at Société Générale say this is the second largest ‘short squeeze’ movement recorded in the market until 2006. In this context, analysts make the following assessment:
As shown in our Mismatch Indicator, the money manager position increased from 10 net long traders for a 27k contract net short position to 28 net long traders for a 15k contract net long position. This indicates overweighted, short positions that may have been reduced as gold prices rose. This is further supported by our Dry Powder Analysis, which shows that money managers’ short positions have diverged significantly from the trend line in nominal terms.
When he did this, gold traded higher
Analysts say gold is benefiting from demand for a geopolitical safe haven for now due to Israel’s war against Hamas. However, they state that it is possible for any spark of uncertainty to ignite this short position. World Gold Council chief market strategist John Reade made the following statement in a social media post:
It’s something I’ve said a few times over the past year or decade. The Comex gold COTR is a useful tool for assessing short-term vulnerabilities in the gold market. There’s something that stands out a few times. When Net Managed Money falls short, it eventually closes it out. This may take several weeks or even months. But when he did this, gold always traded much higher.
Long-term investors also started to enter the market
Analysts also note that this short-term rally may differ from previous periods as it becomes more sustainable as prices test the resistance below $2,000. Data shows that alongside speculative momentum, long-term investors are also starting to enter the market. He also reveals that he has started buying gold-backed exchange-traded products. SPDR Gold Shares, the world’s largest gold ETF, gained 15 tonnes on Friday. This was due to the fact that prices spent most of the session above $ 2,000.
cryptokoin.comAs you follow from , we have finally seen some upward momentum in the market. However, some analysts say prices have gone too high. So he warns that it will likely consolidate at these higher levels.
Gold price technical analysis: ‘Buy it when it drops‘ trade!
Market analyst Dhwani Mehta evaluates the technical outlook for gold. The gold price remains a ‘buy the dip’ trade as the 14-day Relative Strength Index (RSI) indicator is still teasing the overbought zone currently sitting at 69.20. The nearest resistance is at $1,983, the previous day’s high. Additionally, above this lies the July 20 high of $1,988. Gold buyers will then target a five-month high of $1,997. Thus, it will try to break the $2,000 barrier.
Alternatively, if the correction from multi-month highs continues, sellers will need to consistently break the previous day’s low at $1,963 to test the psychological level of $1,950. The last line of defense for gold buyers is the October 19 low at $1,945.
More fixes on the cards for the yellow metal
CME Group’s latest data on gold futures markets shows that traders increased their open positions for the fifth consecutive session on Monday. It also reveals that it has increased approximately 3.7 thousand contracts this time. On the other hand, volume remained volatile. Accordingly, approximately 87.2 thousand contracts contracted.
Gold started the week on the defensive due to increasing open positions. According to market analyst Pablo Piovano, this indicates that there may be additional losses for the yellow metal in the very near term. Meanwhile, the upward attempts seen from time to time in the precious metal are limited to $ 2,000 for now.
To be informed about the latest developments, follow us twitter‘in, Facebookin and InstagramFollow on and Telegram And YouTube Join our channel!