Gold Higher on Short Covering
Gold prices saw a good bounce today as stocks were weaker. After trading down all the way to the $1183 area in overnight trade, gold prices saw a strong rebound and as of this post are trading about $24 higher from the overnight low. Whether or not gold is able to hold these lows remains to be seen, however, it seems that the bulls are intent on putting up a fight at current levels. As we have stated previously, should gold fail at current levels, gold will have completed a bearish descending triangle and could potentially begin another significant leg lower in price. Should this new leg lower start to materialize, $1000 per ounce gold would not be out of the question.
The latest commitment of traders report showed that large spec positions in gold are at their lowest levels since December. When the report reached these levels in December, gold prices proceeded to stage a sizable rebound and formed a double bottom on the daily chart in the process.
The dollar index is weaker today which may be lending some support to gold today. The rally in the dollar has likely been a big obstacle to any sustainable rallies in gold in recent weeks. One has to wonder, however, if the rally has gotten a bit ahead of itself. Any signs of weakness in the dollar could potentially ignite a large short covering rally in gold and perhaps entice more bargain hunters to start dipping their toes in the water. In addition, investors will also continue to monitor the stock market. Thus far, increasing volatility and some weakness has not driven buying in gold but that could potentially change quickly if the market begins to correct further.
This story is provided by Sharps Pixley, for more information and content please visit: www.SharpsPixley.com
07 Oct 2014 | Categories: Gold