Gold Bugs Fly As Fed Doves Cry
Today’s Spotlight Market
While speculative accounts have been net-long Gold futures for quite some time, it is ironic that large traders cut their net-long position sharply just days prior to a near-term bottom forming. The Commitment of Traders report shows that for the reporting period ending on March 10th, non-commercial traders shed a whopping 31,283 net long positions! This took the overall net-long position held by non-commercial accounts to 105,707 contracts. So what we may be seeing is these weak-longs re-entering the Gold market on the long side following the ?dovish? Fed FOMC statement.?? ?
Fundamentals
?Gold futures have turned bullish of late, following what the market has deemed a ?dovish? stance by the Federal Reserve after the Federal Open Market Committee meeting (FOMC) on Wednesday. While the key word ?patient? was removed from the Fed statement following the FOMC meeting, traders focused their attention on the reduction in the Fed?s expectations for both economic growth and inflation in the coming year. This appeared to signal that the Fed may not be in a hurry to begin to raise interest rates, and the expectations for a rate hike were moved further out on the calendar, with the October meeting now on the radar for a potential rate hike. The market reaction has been quite volatile, as markets in major bear market trends such as Crude Oil, Euro FX and Gold have seen counter-trend rallies as short positions are being liquidated. It appears that the market was anticipating that the Fed was preparing for an interest rate hike by the end of the June FOMC meeting, which caused trend-following speculators to increase bearish positions in commodities and non-U.S. Dollars in anticipation of a rate hike. Gold, in particular, would benefit from a ?dovish? Fed, as higher interest rates would lessen the appeal of holding Gold because it pays no dividends and incurs storage costs. However, like a toddler stuck in the car during a long trip, it may only take something ?shiny? such as improved economic data for the Fed to become ?impatient? and finally embark on the first Fed rate increase since 2006
Technical Notes? -? View Today’s Chart
Looking at the daily continuation chart for Gold futures, we notice prices trading above the 20-day moving average for the first time since early February, as well as heading for the downtrend line drawn from the January 22nd high of 1308.80. The 14-day RSI has rebounded from oversold levels to a more neutral reading of 47.90. We also may have a double-bottom formation in play, with the most recent low at 1141.60 being a failed test of the major low of 1132.10 made back on November 7th of last year. 1141.60 remains support for the lead-month April futures, with resistance seen at 1190.00.?
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