Early this morning, selling emerged out of Europe bringing the price of Gold below the all-awaited $1,200 dollar level.
Some European Gold traders said they expected stops to be found just below that level which should have accelerated a sell off, but that didn’t materialize. So at the time of this report at 7:20 am EDT we seem to be holding that level.
Looking at the latest Commitment Of Traders report, we see a massive number of shorts added to the market this week while the longs just cut their positions marginally.
Currently, the longs are reporting 208,292 future contracts in position and the shorts show 195,604 future contracts. Based on the reporting history of the Commitment of Traders report these figures are extremely bullish.
Both longs and shorts speculators thinking they got it right is fuel for a big move in the market one way or the other. History will tell us that the shorts have it wrong and will have to cover in a heartbeat if any substantial geopolitical risks emerge. With the Turkey currency crisis and the continued tariff news effecting the equity markets, I’m surprised to see the price of Gold under continued pressure. But the headline continues to be the strong greenback keeping the price of Gold under its thumb.
The longs claim that they have it right because they believe the Gold market is extremely oversold and the bears expect a continued rally in the U.S. Dollar.
Right now I expect the shorts have it right and I expect a selloff in the price of Gold to continue and test the next spot level of support at $1,189.20.
My charting technicians concur that the charts look very weak and that the sell off should continue as long as the U.S. dollar continues its climb. One just has to look at the two charts on the price of Gold and the Dollar to see they are traveling in opposite directions.
So for those who claim history can repeat itself, they might just have to wait and see a few more Commitment Of Traders reports to see how the professionals play their cards.
In the meantime, I don’t expect the ECB to turn its back on Turkey, but the risk of contagion to other markets still exists, so keeping a close eye on this story is a must for all investors at this time.
Have a wonderful Monday.
Disclaimer: This editorial has been prepared by Walter Pehowich of Dillon Gage Metals for information and thought-provoking purposes only and does not purport to predict or forecast actual results. This editorial opinion is not to be construed as investment advice or as a recommendation regarding any particular security, commodity or course of action. Opinions expressed herein cannot be attributable to Dillon Gage. Reasonable people may disagree about the events discussed or opinions expressed herein. In the event any of the assumptions used herein do not come to fruition, results are likely to vary substantially. It is not a solicitation or advice to make any exchange in commodities, securities or other financial instruments. No part of this editorial may be reproduced in any manner, in whole or in part, without the prior written permission of Dillon Gage Metals. Dillon Gage Metals shall not have any liability for any damages of any kind whatsoever relating to this editorial. You should consult your advisers with respect to these areas. By posting this editorial, you acknowledge, understand and accept this disclaimer.