Gold futures are trading slightly higher on Tuesday, but the low volume suggests the move is being fueled by position-squaring. Despite yesterday’s weaker trade, the move wasn’t strong enough to take out the October 11 low at $1478.00 that has been providing support for more than a week. For that matter, the market hasn’t even come near the $1505.00 high that day, suggesting a developing downside bias.
At 08:01 GMT, December Comex gold futures are trading $1490.60, down $2.50 or -0.17%.
From a market standpoint, gold’s range is being controlled by rising equity markets and Treasury yields. Both markets have kept a lid on gold prices. The weaker U.S. Dollar has had little influence on gold price, except that maybe it is preventing the market spiking sharply lower.
The dollar isn’t weakening because the U.S. economy is slowing down, the dollar is under pressure because investors have been exiting their long hedge positions since the U.S. and China announced a partial trade deal on October 11.
That takes us to the key fundamental event driving the price action. It’s not Brexit. It’s not the upcoming rate cuts by the Federal Reserve, the Bank of Japan and the Reserve Bank of New Zealand. It’s the hope of at least a partial trade deal between the United States and China.
This is what gold traders are focusing on.
Hedge Funds Reducing Bullish Bets on Gold
Gold may be struggling to overcome resistance because hedge funds have been liquidating bullish positions, according to the latest data from the Commodity Futures Trading Commission (CFTC).
The CFTC’s Commitment of Traders report, for the week-ending October 15, showed money managers dropped their speculative gross long positions in Comex gold futures by 17,989 contracts to 213,987. At the same time, short bets rose by 6,725 contracts at 38,200. Gold’s net-long positioning currently stands at 175,787 contracts, down more than 12% from the previous week.
Gold is likely to remain under pressure as long as President Trump and other U.S. officials keep pumping out upbeat comments on the status of trade negotiations with China.
Trump told reporters on Monday that he was hoping to sign a trade deal with China next month at a summit in Chile, “or whenever that might be.”
Economic adviser Larry Kudlow, said, “I really like what they’re saying on the other side.” If current talks go well, he said, Trump might put off imposing more tariffs planned for December.
Commerce Secretary Wilbur Ross was more cautious, saying that the timing was less important than the contents of any deal.
“It doesn’t have to be in November,” Ross told Fox News. “The key thing is to get everything right that we do sign.”
Gold is likely to remain rangebound, but with a slight downside bias as long as the U.S. and China are still talking. I don’t expect to see a major move until there is major news about a trade deal ….good or bad.
This article was originally posted on FX Empire
More From FXEMPIRE:
- Crude Oil Price Update – Holding Above $52.94 Will Generate Upside Bias
- Silver Continues to Drift
- EUR/USD Daily Forecast – Euro Snaps 4-day Winning Streak
- Important Economic News Calendar: October 21 – October 25, 2019
- U.S. Dollar Index Futures (DX) Technical Analysis – Testing Major Retracement Zone at 97.140 to 96.630
- Oil Price Fundamental Daily Forecast – Steady as Weak Demand Outlook Offsets Trade Deal Optimism