Relaxation signals from the USA and Great Britain put the gold price under pressure before the weekend. And there is still potential for correction, also in view of the situation on the US futures market. This opens up new opportunities for gold investors.
Gold price below 1,500 dollars
Last week, the price of gold slipped once again below the 1,500 US dollar mark. At the close of trading on Friday, the price was quoted at 1,488 US dollars per ounce (FOREX). This was due to the approach of the USA to China in the trade dispute. The parties agreed on the first points of a partial agreement before the weekend in Washington. Observers also noticed slight progress in the Brexit agreement. It is said that Prime Minister Boris Johnson is now ready to leave the British EU and that there will be no border with customs controls on the Irish island. Talks with leading EU representatives are planned for Monday.
The US futures market continues to be buoyant with gold futures trading. As of October 8, there were the following changes in the positions of the largest groups of traders. The net short position of the “Commercials” rose by 2 percent to 310,942 contracts. Both subgroups (“Prod/Merch/Proc/User” and “Swap Dealers”) were equally involved. The net long position of the “big speculators” rose in equal measure to 275,563 contracts. However, it was mainly managed money (hedge funds, investment companies) that was responsible for the 5 per cent increase in net purchases. Open interest, i.e. the sum of all open gold contracts on COMEX, rose by 2 per cent to 616,957 contracts on a weekly basis. By the close of trading last Friday, open interest had fallen by 1.8 percent to 605,865 contracts.
Sooner or later there will be a stronger adjustment of the net positions in trading gold futures. The question is whether the time is ripe. The easing on two crisis fronts (USA/China, Brexit) is suitable for introducing further levies on the gold price and at the same time boosting the stock markets. The gloomy economic outlook (increasingly also in Germany) and the very obvious problems in the financial sector with a new flood of money in the USA (Fed buys bonds for 60 billion dollars a month) and in the euro zone will then take a back seat.
Opportunity to buy?
After the sharp rise in prices in recent months, this may provide another good opportunity for long-term gold investors to buy more gold. Because the next crisis scenario is certain to come. If Trump has successfully implemented his negotiating tactics with China, he will take on the European Union. And there’s nothing dry about Brexit either. The world has a growth problem, bilateral trade agreements merely redistribute demand. Which countries will sit on their pigs if China soon makes American farmers happy with the billions they have announced to buy? And the next trump tweet is sure to come. From a chart technical point of view, the next important support is 1,473 US dollars/ounce. Calculated in euros, we already see a critical mark at 1,342 euros. If these thresholds are undercut, then in both cases a good 5 percent can go down again.