Today’s Spotlight Market
Large speculators have been reducing their net-long positions in the entire precious metals complex as the odds of a December Federal Reserve interest Rate hike increases. The Commitment of Traders report that ended October 11 showed non-commercial traders reduced their net-long position in the precious metals complex by over 70,000 contracts, with the greatest reduction in Gold. Small speculators were also reducing net-long positions in the metals, with Palladium futures seeing the largest reduction at 614 contracts.
Fundamentals
While the Gold futures market has been a rather strong performer for commodity bulls in 2016, the prices have run up against some headwinds of late in the guise of a stronger U.S. Dollar. A stronger ?greenback? is viewed as a negative for Dollar denominated commodities, as it is more expensive for non-Dollar buyers. In the case of Gold, the prospects of a Federal Reserve interest rate hike in December and a rising Dollar is a double whammy for prices, as owning Gold does not pay any dividends and, in fact, has costs associated in owning the physical metal. While the Gold charts are showing prices off recent highs, investors in Gold ETFs are not yet ready to throw in the towel, as holdings have held steady or have risen the past two weeks. In fact, Gold prices are holding up relatively well when compared to that of its ?sister? in the precious metals complex?Silver, and both are doing stellar when compared to its ?cousins? Platinum and Palladium. As we head into the final weeks of 2016, many Gold traders will be watching closely upcoming economic data for signs regarding whether the Federal Reserve will indeed raise interest rates this year and if so, will it be a ?one and done? event or the start of a series of rate hikes by the Fed, which would likely increase the pressure on Gold bulls in a rising interest rate environment.
Technical Notes? -? View Today’s Chart
Looking at the daily chart for December Gold, we notice prices have fallen from recent highs but appear to be trying to consolidate near the 1250.00 to 1270.00 price area. Prices are also trading near both the 20- and 200-day moving average (MA), and it appears that the 20-day MA is attempting a test of the 200-day MA.? A crossover of the 20-day MA below the 200-day MA is generally viewed as a bearish technical signal. The 14-day RSI is also weak but holding above oversold levels with a current reading of 38.20. We should also note that trading volume has fallen during the recent price consolidation, so traders may want to? pay heed to volume levels should prices move above or below recent support and resistance, as a move out of consolidation on above average trading volume could be an indicator as to the direction of the next price trend. The low of 1243.20 made on October 7 looks to be the next support level for the December futures, with resistance appearing at the October 20 high of 1275.90.
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