Two Steps Forward, One Step Back?

London (July 23)  We believe that gold and the SPDR Gold Trust (GLD) have established another short-term uptrend, but see risks tilted to the downside for next week. It might be healthy for the current uptrend for gold to retest some of its key levels below. If we are in a two-steps forward, one-step back move higher, this might be a week where we take a step back.

This week, gold and the SPDR Gold Trust (GLD) strengthened its short-term up-trend, while over-performing safe haven alternatives into over-valued territory in our precious metal matrix. With hedge funds holding a high gross short position, it is possible that we could see some additional short-covering this week. It is possible that hedge fund shorts have positioned some stop loss orders above $1,260 (roughly $120 GLD), so if the gold price rises above there, it could get a short covering rally. Option expiration for gold on the COMEX is Wednesday, July 26th. While this is not always the case, the option expiration in June was preceded by a flash crash in the price of gold.

We publish a daily precious metals report for our premium subscribers which touches on the metrics above. This week, we will be posting some insights on our option expiration magnet, and how it might affect this week’s trading.

Source: VikingAnalytics