Price of Gold Fundamental Daily Forecast – CFTC Data Indicates Bears Reduced Record Short Positions

Gold prices are slightly lower early Monday. Volume is light because of the U.S. bank holiday. There is some electronic trading taking place, but the major banks and institutions are likely to be on the sidelines so prices can be manipulated by a few big orders.

At 0602 GMT, December Comex Gold futures are trading $1206.40, down $0.30 or -0.02%.

The early two-sided trade in gold is mirroring similar movement in the U.S. Dollar. The lack of fresh news is also helping to create investor indecision and impending volatility.

At the start of the week, the issues are the trade negotiations between the United States and Canada, which concluded on Friday without a new deal, and fresh tariffs from the U.S. on China, which could be announced later in the week.

Despite the expected resumption of U.S-Canada trade talks on Wednesday, they are not going to begin without lingering tensions. On Saturday, President Trump said there was no need to keep Canada in the North American Free Trade Agreement and warned Congress that he would terminate the trilateral trade pact altogether.

As far as China is concerned, Trump told his aides last week he is ready to impose tariffs on an additional $200 billion worth of imports from China as soon as a public comment period on the plan ends on Thursday.

Forecast

There are no major economic reports today because of the U.S. holiday. Furthermore, any price action today will take place under extremely thin-trading conditions. This means be careful buying strength and selling weakness.

Gold is likely to continue to be manipulated by the price action in the U.S. Dollar. Safe-haven buying into the dollar is likely to keep a lid on gold prices. The catalyst behind any movement in the dollar will likely be trade related.

We’re going to be watching gold prices carefully over the next several weeks because new data from the Commodity Futures Trading Commission (CFTC) indicates that the bearish sentiment may be shifting. The government data as of the week-ending August 28 shows there was a reduction in net short positions in the COMEX gold contracts for the first time in more than a month.

When gold reversed at $1167.10 on August 16 and continued to rally into $1220.70 on August 29, we figured it was short-covering so the news is not a surprise. Typically, the first move up in a bear market will be massive short-covering. Then following a near-term retracement of the first leg up, the real buyers come in. This being said, we’d like to see a pull-back into at least $1193.90 to $1187.60. A test of this zone could bring in the real buyers. If it does then look for the start of a rally. If the zone fails as support then look for the selling to resume.