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James Hyerczyk
Comex Gold

Gold is trading higher on Monday after testing a four-month low last week and a key technical support level. Post-holiday volume remain light with several markets still closed for the Easter holiday. Traders are saying gold is gaining traction due to the surge in crude oil prices. Gold is also being underpinned by a weaker U.S. Dollar, lower Treasury yields and a dip in demand for higher risk equities.

At 11:36 GMT, June Comex gold futures are trading $1280.40, up $4.40 or +0.34%.

In other news, investors continue to reduce their exposure to gold. Speculators switched to a net short position in COMEX gold in the week to April 16, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday.

Additionally, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange traded fund, dropped to 751.68 tonnes on Thursday, the lowest level seen since October 26.

Daily Forecast

There aren’t any major economic releases from the United States on Monday so the narrative driving prices today is likely to be the steep rise in crude oil prices. According to CNBC, “Gold is positively correlated to oil as the metal is often seen as a hedge against oil-led inflation.”

Given the net short position by speculators and the weaker U.S. Dollar, short-covering is likely to support gold prices today, but gains will be limited if Treasury yields or stocks reverse to the upside.

Gold could find further support if the U.S. decision to put pressure on Iranian oil imports creates geopolitical turmoil. Furthermore, the bombing in Sri Lanka on Easter Sunday could lend additional support.

The key upside level to watch is $1285.50. Sellers are likely to come in on the first test of this level. However, prices could begin accelerating to the upside if buyers take out this level with conviction. That means a combination of short-covering and strong speculative buying.

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