By Bhavik Patel
Gold market is looking to end quietly as yesterday, US market was closed on account of Thanksgiving holiday and opened only for half a day today. Gold and silver have benefited this week from shifting expectation that US Fed will slow the pace of rate hikes, after FOMC minutes were published. Markets have already priced in 50 bps rate hike from Fed this December. Worldwide, other major central banks have also started to wind down their aggressive rate hikes, as last week ECB stated that they see no point in another 75bps rate hike. The World Gold Council reported on November 1st, that central bank purchases of gold had hit an all-time quarterly high in Q3.
Although gold has managed to sustain above $1750, there is still a lack of bullish interest to drive prices higher. The recent rally was on back of short covering but we have not seen fresh long position getting added. Speculative positioning in the precious metals market has become significantly less bearish in recent weeks, as hedge funds mostly covered their short bets. However, the market is still unable to attract enough bullish interest for a sustained rally.
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Money managers increased their speculative gross long positions in Comex gold futures by 7,006 contracts to 95,065. At the same time, short positions fell by 34,797 contracts to 69,608.The gold market is now net long by 25,457 contracts with bullish positioning hitting its highest level in three months.
Gold has not generated enough momentum to break the resistance of $1800. Short-term dynamics point to a ranging scenario. It remains unclear if the rebound this month is a precursor to a reversal of the downtrend or a corrective rally, given the steep losses this year. In MCX, gold is at 6 month high partly due to weak Indian Rupee. The recent rally was steep and as we had stated last week that prices have stretched too far too fast and pullback is necessary. This week we saw that and gold is still trying to consolidate in the range of 52000-53000. Support for gold is around 52000, which is where its recent swing low and also 200-day moving average on daily chart is. Gold will be vulnerable below $1780 or 52000 in MCX. Any longs can be hold with stoploss of 52000 and for next week also we would recommend taking long position at any dip with stoploss of 52000 and expected target of 53000.
(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.)