Calm Before the Storm for Gold Prices?
Today’s Spotlight Market
Large speculators have been in a bullish mindset of late after adding to their overall net-long positions in Gold the past week. The most recent Commitment of Traders report shows non-commercial traders adding over 6,000 net-long positions during the week ending March 4th.? On the other side of the trade were small speculators, who were reported to have liquidated just over 2,800 net-long positions, as well as commercial traders, who increased their overall short position by over 3,200 contracts during this time period.
Fundamentals
Following a price move below 1200.00 to start the year, front month Gold futures have staged a quiet recovery, rallying over $150 per ounce since January. With prices now hovering near 4-month highs, we have seen prices begin to consolidate within a $35 per ounce price band the past 2 weeks as neither bulls nor bears seems to have gained the upper hand at the moment.
Among the top concerns being voiced by Gold traders is the apparent sluggishness in the Chinese economy, which was highlighted by a surprising decline in Chinese exports which fell by 18% in February. Slower growth levels may force analysts to lower their estimates for Chinese commodity demand in the coming months, which can be viewed as a negative for Gold prices.? China is believed to be the 3rd largest holder of Gold with an estimated reserve of 2,710 metric tons. Aggressive Chinese Gold purchases the past 5 years had some analysts looking for China to eventually hold as much Gold as that of the U.S., currently at 8,133.5 metric tons. But the timing of additional Chinese purchases remains unknown and it could take decades for the world?s most populous nation to accumulate that much of the yellow metal.?
On the positive side for Gold prices, traders note some increased interest in Gold as a ?safe haven? investment of late, as heightened geopolitical risks have emerged in Eastern Europe with Russian troops having occupied the Crimean region of Ukraine following the ouster of the nation?s President Viktor Yanukovych. This has led to calls by some political leaders for economic sanctions against Russia, which if implemented, could result in some sort of retaliation by Russia against western nations and potentially heighten global tensions which could trigger a flight back towards Gold by nervous investors. ?
Technical Notes? -? View Today’s Chart
Looking at the daily continuation chart for Gold futures, we notice the bullish price move off the January lows has taken a bit of breather following a rally of over $150 per ounce. Prices have consolidated just above both the 20 and 200-day moving average although the 14-day moving average has moved out of overbought territory with a current reading of 62.00.
On a longer-term view, there appears to be a ?double-bottom? formation on the daily chart going back to the July 2013 low. This could be a sign that a major bottom is in place but we would need to see a close above the intermediate high of 1428.00 to further validate this bullish chart formation. Near-term support is seen at 1317.40, with resistance found at 1355.00.
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