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Price of Gold Fundamental Daily Forecast – Headline Buyers Holding Longs at Nearly Seven-Year High

The two-day price action is starting to suggest that the hedge funds sold a big chunk of their bullish positions to small speculators reacting to the headlines. This is typical and is basically how markets work.
James Hyerczyk
Comex Gold

Gold prices are trading slightly lower on Tuesday shortly after the cash market opening after nearly erasing earlier losses. Earlier in the session, profit-taking drove the gold market through yesterday’s low, nearly filling in a gap formed Sunday night.

Fears of a widespread conflict between the United States and Iran persisted on Tuesday although this doesn’t appear to be the case in the safe-haven Treasurys and Japanese Yen. Furthermore, we’re seeing a drop in crude oil prices and a slight pick-up in demand for stocks.

At 13:35 GMT, February Comex gold is trading $1568.60, down $0.20 or -0.01%.

Gold prices retreated because there was no further escalation of the tensions between the United States and Iran, however, they also found support because the threat of a conflict still exists. Essentially, gold traders found no reason to pay up for prices, but felt there was value at lower prices.

Gold spiked higher on Friday and Monday after a U.S. airstrike that killed a high ranking Iranian military official, raised the odds of a military conflict between the U.S. and Iran.

Although warnings of new strikes and retaliation by both the United States and Iran stoked concerns about a broader Middle East conflict, cooler heads have prevailed so far, giving gold buyers an excuse to book profits. Furthermore, there are calls in the U.S. Congress for legislation to stop U.S. President Donald Trump from going to war with Iran.

Bullish sentiment was also boosted after the United States denied a visa to Iranian Foreign Minister Mohammad Javad Zarif that would have let him attend a United Nations Security Council meeting in New York on Thursday.

Bullish traders are also worried about conflicting reports about American military repositioning troops in preparation for leaving Iraq. If conditions de-escalate with Iran, then this will give buyers another reason to sell their gold holdings. Prices could drop fairly quickly on this news.

In other news, speculators increased their bullish positions in COMEX gold and silver contracts in the week to December 31, U.S. government data showed.

Daily Forecast

The two-day price action is starting to suggest that the hedge funds sold a big chunk of their bullish positions to small speculators reacting to the headlines. This is typical and is basically how markets work.

The hedge funds accumulated gold at lower levels in November and December as they bet on stock market weakness. They received a gift when tensions escalated in the Middle East. The spike in the market wasn’t necessarily fueled by hedge funds buying, but probably by the public chasing the market higher. So I have to say that if the market continues to retreat from current levels, the small speculator has been left holding the bag at nearly a seven-year high.

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