Gold Price Prediction – Gold Breaks Out as Hedge Funds add to Long Positions

Gold prices broke out on Tuesday during a holiday shorted session pushing through the December highs despite a stronger dollar and unchanged US yields. There was very little data to drive prices following Monday’s US Durable goods orders which was weaker than expected and a downgrade in projected US GDP by the Atlanta Fed. Riskier assets started to consolidate which helped the yellow metal continue to gain a foothold.

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Technical Analysis

Gold prices broke out above the December highs near 1,486, breaking through a downward sloping trend line and is now poised to test the November highs at 1,516. Support is seen near the 50-day moving average near 1,477, which coincides with the downward sloping trend line. Additional support is seen near the 10-day moving average at 1,470. Short term momentum is reaccelerating as the fast stochastic generated a crossover buy signal. The only caveat is that the fast stochastic is printing a reading of 87, above the overbought trigger level of 80, which could foreshadow a correction.Medium-term momentum is positive as the MACD histogram prints in the black with an upward sloping trajectory which points to higher prices. The RSI (relative strength index) is accelerating higher pointing to accelerating positive momentum.

Hedge Funds Remain Long Gold

Hedge funds added their long position in futures and options according to the latest commitment of trader’s report released for the date ending December 17, 2019. According to the CFTC, managed money increased long position in futures and options by 18.5K contracts while reducing short position in futures and options by 3K contracts. Open interest that is long futures and options outnumbers open interest that is short futures and  options by a ratio of nearly 10-1. This leaves the gold market vulnerable to a long liquidation.