• 4 days 3 Restaurant Stocks In Full Recovery Mode
  • 5 days Bitcoin Is Driven By Testosterone
  • 10 days Quantum Computing Is The Newest Megatrend In Silicon Valley
  • 11 days How To Invest In The Cybersecurity Boom
  • 13 days Investors Are Patient With Unprofitable Giants
  • 15 days Wells Fargo Back In The Scandal Spotlight Once Again
  • 17 days 5 Stocks To Keep A Close Eye On This Year
  • 18 days As Auto Giants Flail, Look To Chip Stocks For Gains
  • 19 days Central America Is Ready For The Bitcoin Hustle
  • 20 days China’s Video Game Restrictions Unlikely To Slow Down Booming Industry
  • 22 days Top Performing Stocks As Inflation Fears Grow
  • 23 days US Airline Stocks Take A Beating On New EU Restrictions
  • 24 days This IPO Could Open Sustainable Fashion Floodgates
  • 25 days Crypto Crime Nets Another $2B Fraudster
  • 26 days This Week’s Hottest Meme Stocks
  • 28 days Why World Markets Should Be Watching Germany Closely
  • 30 days Could ‘Cultured’ Meat Rival The Plant-Based Megatrend?
  • 32 days ‘Easy Money’: Crypto Is Still Attracting Newbie Investors
  • 34 days Foreign Syndicates May Have Stolen Up To $400B In COVID Benefits
  • 35 days Gold Jumps Above $1800 Ahead Of Jackson Hole Summit
Dan Norcini

Dan Norcini

Dan Norcini is a professional off-the-floor commodities trader bringing more than 25 years experience in the markets to provide a trader's insight and commentary on…

Contact Author

  1. Home
  2. Markets
  3. Other

Gold Hovering Above Support

Originally published November 16, 2015, 10:48 pm.

Just as the Euro is hanging by a thread above its chart support zone, so too is gold hanging by a thread above a critical chart support zone. The bottom of that zone is the July low near $1070 with the zone extending upward towards $1080.

Gold drew a bit of support in today's session ( Monday) out of safe haven buying tied to the horrific carnage in Paris but as is always the case with gold, rallies that come from geopolitical events, generally do not last long, especially when the underlying fundamentals for gold are as poor as they currently are.

Daily Gold Chart
Larger Image

On the chart, the RSI failed to hold near 30 and has been trapped below that number for the last ten days or more portraying its inherent weakness. The market is oversold but markets can work off oversold readings by moving sideways. That is currently what gold is doing ever since it fell below $1100.

You can see the ADX has flattened out due to the sideways movement but the -DMI remains solidly above the +DMI denoting that the bears are still in control of this market.

From the COT standpoint, hedge fund longs are bailing out while some other entities within that classification are pressing it from the short side as they viewed the collapse beneath $1100 as a signal to sell. They are now hoping to press it down through $1080 on a CLOSING BASIS as that will more than likely trigger a break of $1070 if they are able to achieve the former.

Gold COT
Larger Image

One thing to note -the hedge fund outright short position is a long way from its recent peak this past August. Their outright long position is relatively small by comparison to levels they have held in the past but it is still nothing to sneeze at for if that downside support level is taken out, there is still a significant number of them that will be forced to sell.

Here is a look at how the Commercials and the Swap Dealers have been dealing with the gold futures market.

Processor/Merchant and Swap Dealer Net Position
Larger Image

You can see that the recent large net short position held by both categories corresponded nicely with the peak in the gold price during the third week of October.

The Hedge fund long liquidation can be seen in the following chart with the gold price following it lower.

Hedge Fund Net Gold Positions
Larger Image

As noted above, a downside breach of $1180 on a closing basis and especially the loss of $1070 should it occur, would result in a sizeable wave of remaining longs bailing out. The question is whether or not the Dollar can take out 100 basis the USDX and whether the Euro can hold 1.050. That would break the back of gold.

 

Back to homepage

Leave a comment

Leave a comment