By Bhavik Patel
Gold market is holding levels of $1800 after selling pressure were witnessed following stronger than expected economic growth in third quarter. US GDP came at 3.2% verses expectation and previous data of 2.9%. Price of gold is getting supported by persistently high inflation. The third-quarter Price Index rose 4.4% while expectation was increase of 4.3%. Gold looks on course to continue its grind higher for the rest of 2022 with the technicals lining up as well. Given the US dollars performance in January historically we are likely to see a return of dollar bulls which could see the precious metal begin 2023 on the back foot. There are also less chance of Santa rally this year as gold has already made significant gains in last months and people would be looking to book profit instead of piling fresh long positions. But we are bullish in gold of 2023 and one of the key highlight is that hedge funds have started increasing their bullish positions.
After weeks of short covering, money managers have started to build long exposure in the gold market once again. With inflation data coming in below expectations, market participants anticipated the upcoming FOMC meeting would tilt firmly toward the dovish side, seeing the yellow metal move above $1800 once again. The CFTC’s disaggregated Commitments of Traders report for the week ending December 13 showed money managers increased their speculative gross long positions in Comex gold futures by 10,108 contracts to 103,737. At the same time, short positions fell by 3,854 contracts to 66,288. The gold market is now net long by 37,449 contracts, reaching its highest level since late-August.
In MCX, gold has failed to sustain above 55000 levels historically and it needs weekly closing above that level for bulls to establish control. Focusing in on more recent price action, the past two weeks have been good for Gold as it has steadily climbed from 53000 to 55000. On short term basis, gold has to move above $1845 as it has faced resistance previously too. We anticipate some profit booking and price correction to take place as price are still away from important moving average especially 20-day moving average and so for further rally, gold need to consolidate. Second is we are witnessing negative divergence on daily scale in RSI_14 which again is hinting of profit booking. 53800 is next support which we believe is good level for traders to take fresh long position. Any long positions should be booked at current level and wait for 53800 in MCX for fresh trade with stoploss of 53400 and expected target of 55000.
(Bhavik Patel is a commodity and currency analyst at Tradebull Securities. Views expressed are the author’s own. Please consult your financial advisor before investing.)
