Gold is down 13% from year highs. The trend has actually been amazingly perfect, one way traffic down where every bounce up has eventually been sold.
In mid August we saw a capitulation move that was later followed by a violent bounce up. Since then gold has managed holding some ground as it hovers around the 1200 level.
We are not calling a new bullish trend here, but would like to point out the importance of watching the negative trend and a possible break above it.
Of course gold is a “slightly” inverted play on the USD. Watch the 1200 level carefully. Should gold close above it, there will surely be many shorts starting to think about covering those positions.
Image source: Bloomberg
It was a long time ago we heard anybody talk bullish about gold. On the contrary there are many people out there quickly explaining the rationale for being short gold.
Catching falling knives is not a strategy to recommend, but whenever positioning starts becoming extreme, it makes sense to start putting those asset on the radar.
Net non commercial futures positioning has both moved lower quickly as well as the absolute levels are reaching rather extreme levels. People hate gold, period.
Image source: Bloomberg
Below chart shows positioning (white) and the gold price (orange). Note how all bigger extreme lows in positioning have been reversed by sudden sharp bounces in gold. Current berish positioning is at multiyear lows.
It would be interesting to see how all these novau shorts would react to a pop above 1200.
Image source: Bloomberg
Easiest way to play pure gold is via the gold ETF GLD US. Note the same negative trend that is key.
Image source: Bloomberg
Implied vol of GLD US trades rather fair.
Image source: Bloomberg
