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Declining Long Positions in Gold: What Does This Mean for the Market?

Time for Movement

Gold has been consolidating into a large formation resembling a triangle or wedge over the past few months. Notice that we are once again above the 100-day moving average and are currently reaching the 50-day moving average. Short-term support: $2610, resistance: $2670. The formation is becoming increasingly tight. The time for a decision is approaching…

Resistance to Interest Rates

Gold has largely ignored the interest rate hikes we have seen since early December. What will happen if interest rates start to decline? The chart shows gold versus 10-year U.S. bonds (inverted).

Resistance to the Dollar

Gold has remained resilient against the strong dollar. The precious metal has actually been almost unchanged since early November, even though the U.S. Dollar Index (DXY) has risen by about 5%. The chart shows gold versus DXY (inverted). What might happen if the dollar pauses?

Reduction of Long Positions

Net non-commercial positions in gold have reduced their long positions. Gold’s volatility is trading with an “upward slope.” The GVZ index has decreased during gold’s consolidation phase. We find options for upward movement in gold (preferred are call spreads) to be attractive, given where volatility is currently trading.

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