Gold prices pushed lower yesterday, trading below 1,300 during US afternoon despite broad risk appetite staying bearish. Despite being a traditional safe haven asset, “risk off” trend failed to have a bullish impact on Gold yesterday, but that is no surprise as fundamentals do not support inflated Gold prices in the long-run. Furthermore, CFTC Commitment of Traders Report suggests that institutional speculators are clearing their long positions, compounding the bearish pressure.
What is more interesting is current minor rally seen during Asian hours that has sent prices back above the 1,300 round figure. This is because Asian stock indexes are actually bullish – ASX 200 is back in the black at +0.04%, rebounding from a initial 0.35% drop. Singapore’s STI and Hong Kong’s HSI are clocking decent gains, with the only major loser being Nikkei 225 which is standing at -0.88%. However, it should be noted that prices of N225 remained mostly stable, with the losses mostly due to the bearish gap. Hence, if risk trends are anything to go by, we should be seeing Gold trading lower and not higher right now.
Such price action puts a major spanner in our previous assertion about strong bearish pressure, as we should have expected bears to go for the jugular and push prices lower when risk trends are in favor of a bearish move, instead of moving against the flow higher. This suggest that that uptrend that has started since 2nd April may still be in play and it will be folly to simply brush upside risk away in the immediate short-term.
That being said, long-term bullish follow-through is unlikely to be significant with prices likely to face resistance from Channel Top which will likely coincide with Stochastic indicator being Overbought should that happens. As such, Channel Bottom remain a viable bearish target, and will remain so unless prices manage to break Channel Top and more importantly push beyond last Friday’s swing high. If that happens, it is possible that institutional speculators may start to stock up Gold once again to speculate on the bullish momentum. On the other hand, failure to do this may spur yet more selling from the said speculators as they have yet to clear all their previously long positions based on the COT report.
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