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The price of gold is trading at a four and a half month high as more evidence continues to come forth that a shift in the derivative market is underway towards the yellow-metal, while the bid-tone continues in the spot market.
Gold ETF’s have been seeing strong inflows as traders move away from Bitcoin and into gold, as the top digital asset appears increasingly volatility and unable to hold onto its strong 2021 gains amidst calls from China for tighter regulatory control.
Traders and investors have been seeking a hedge against inflation, and Bitcoin has been the number one vehicle of choice so far this year. Gold is now starting to benefit from inflation fears also, as the precious metal is known to be a relatively stable store of value.
Interestingly, hedge funds and other leveraged speculators in Comex gold futures and options market increased bullish bets towards the yellow metal for a fifth straight week last week. Typically, the futures and options market provide a reliable guide as to where the spot market is headed
Bearish bets towards gold on the Comex have been declining for 3 weeks. It is particularly noteworthy that the price gold has risen by over $100.00 over the last three-weeks, which provides more evidence that the futures and options market can often be looked upon as “smart money”.
Data shows that managed money also has its highest percentage allocated to gold longs in over 12-weeks right now, which points to further gains ahead. Interestingly, speculators cut their net long silver bets last week. This could mean that gold is about to outperform the silver market.
Current sentiment metric towards gold suggest that further price gains are increasingly likely. The ActivTrader Market Sentiment tool shows that some 57 percent of traders are negative towards the yellow metal right now.
I would expect further gains while traders remain on the wrong side of the trade in terms of sentiment. Should we see sentiment getting even more bearish, therefore I would expect gold to take out the $1,900 level sooner rather than later.
Gold short-term Technical Analysis
The short-term technicals for gold appears relatively simple right now, with two possible scenarios likely to occur over the coming days and weeks for the yellow metal.
If bulls can move the price above the $1,890 level then a price rally towards the $1,910 level is likely to occur. Failure to overcome the $1,890 and a shar pullback is very likely.
Bearish MACD price divergence on the one-hour time frame is warning that the price of gold could decline towards the $1,845 price area.
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Gold Medium-term Technical Analysis
According to the daily time frame, gold has broken free from a massive falling price channel, and this breakout remains valid while the price trades above the $1,855 price area. Bulls may attempt to buy any dips towards the channel.
Fibonacci extension analysis is showing that the 161.80 percent Fib extension target of the yearly low to the February 23rd high is another major target, at $1,970.
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