Gold Surges Again as Shorts Bet Against the Rally
Gold Surges Again as Shorts Bet Against the Rally
Commitments of Traders Report data comes into focus as prices climb
- Conflicting narratives are driving gold volatility as prices rise.
- Gold speculators grow the shortest since November 2022.
- The technical outlook for gold shows a retracement is in order.
Gold prices surge as geopolitical risk swell
Gold prices (/GCV3) surged over $30 per ounce, or +1.6%, this afternoon as geopolitical fears deepened following mass casualties at a hospital in Gaza. Both sides traded blame for the event, but for financial markets the impact weighed on risk sentiment.
That benefited gold prices, which typically react positively to events that stoke the potential for further military intervention. Gold is now on track to record its best monthly performance since March, currently at +5.4%.
Meanwhile, gold volatility—via the Chicago Board Options Exchange’s gold volatility index (GVZ), which is like the volatility index (VIX ) but for gold—is up 8% this month. This increase in volatility suggests traders are increasingly unsure about the direction of gold.
Fed tightening takes a backseat, for now
Gold traders seem unfazed by increasing Treasury yields, which is an interesting conflict because higher yields typically weigh on precious metals. The 10-year note’s yield rose four basis points through mid-afternoon trading.
The conflict between Israel and Hamas pushed oil prices higher, which is fueling Fed rate hike bets, as traders price higher energy prices into the inflation outlook. For now, however, it appears gold traders are more concerned with the potential for a wider war.
COT data shows speculators adding shorts
The latest Commitments of Traders Report (COT) from the Commodity Futures Trading Commission (CFTC), released Friday, showed some interesting developments for speculator positioning.
Non-commercial traders, a group that represents market speculators, cut their long bets by 8,046 contracts, while adding 11,719 short contracts. That pushed the total short position to the largest since November 2022.
Does that mean those speculators are correct and gold is about to sink? Not so fast. Gold prices rallied over 20% in the three months following November 2022. If we follow this type of historical context, we could see gold prices rally.
Gold technical outlook
The regression channel from the May high to the October low shows gold prices have run too high. A retracement to the mean is in order. Moreover, prices are approaching the 200-day simple moving average. This may represent a good place for shorts to establish a trade if prices have trouble eclipsing the key moving average.
Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater
For live daily programming, market news and commentary, visit tastylive or the YouTube channels tastylive (for options traders), and tastyliveTrending for stocks, futures, forex & macro.
Trade with a better broker, open a tastytrade account today. tastylive, Inc. and tastytrade, Inc. are separate but affiliated companies.
Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.
tastylive content is created, produced, and provided solely by tastylive, Inc. (“tastylive”) and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, digital asset, other product, transaction, or investment strategy is suitable for any person. Trading securities, futures products, and digital assets involve risk and may result in a loss greater than the original amount invested. tastylive, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastylive is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparisons, statistics, or other technical data, if applicable, will be supplied upon request. tastylive is not a licensed financial adviser, registered investment adviser, or a registered broker-dealer. Options, futures, and futures options are not suitable for all investors. Prior to trading securities, options, futures, or futures options, please read the applicable risk disclosures, including, but not limited to, the Characteristics and Risks of Standardized Options Disclosure and the Futures and Exchange-Traded Options Risk Disclosure found on tastytrade.com/disclosures.
tastytrade, Inc. ("tastytrade”) is a registered broker-dealer and member of FINRA, NFA, and SIPC. tastytrade was previously known as tastyworks, Inc. (“tastyworks”). tastytrade offers self-directed brokerage accounts to its customers. tastytrade does not give financial or trading advice, nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of tastytrade’s systems, services or products. tastytrade is a wholly-owned subsidiary of tastylive, Inc.
tastytrade has entered into a Marketing Agreement with tastylive (“Marketing Agent”) whereby tastytrade pays compensation to Marketing Agent to recommend tastytrade’s brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastytrade. tastytrade and Marketing Agent are separate entities with their own products and services. tastylive is the parent company of tastytrade.
tastycrypto is provided solely by tasty Software Solutions, LLC. tasty Software Solutions, LLC is a separate but affiliate company of tastylive, Inc. Neither tastylive nor any of its affiliates are responsible for the products or services provided by tasty Software Solutions, LLC. Cryptocurrency trading is not suitable for all investors due to the number of risks involved. The value of any cryptocurrency, including digital assets pegged to fiat currency, commodities, or any other asset, may go to zero.
© copyright 2013 - 2024 tastylive, Inc. All Rights Reserved. Applicable portions of the Terms of Use on tastylive.com apply. Reproduction, adaptation, distribution, public display, exhibition for profit, or storage in any electronic storage media in whole or in part is prohibited under penalty of law, provided that you may download tastylive’s podcasts as necessary to view for personal use. tastylive was previously known as tastytrade, Inc. tastylive is a trademark/servicemark owned by tastylive, Inc.