Gold Technicals – Continuing lower as more traders bet on shorts

Gold continue to slide lower on this week open, heading closer towards the previous swing low back in April. Prices have been heavily depressed recently due to a myriad of technical (Channel rejection pattern) and fundamental reasons (renewed talks of tapering QE3 down by various Fed members), but all in all, the decline that we’ve seen is nothing new in the bigger scheme of things – where Gold prices have been on the decline ever since QE3 has been announced back in Sept 2012.

Weekly Chart

With that in mind, it is interesting to note that price did trade lower after Fed’s Fisher, Plosser and Williams made their individual hawkish statements as price didn’t react favorably post QE3, suggesting that bears may be simply looking for reasons to sell, which make sense considering the heavy bear trend that we’re in currently.

Hourly Chart

Short-term chart has its own share of bearishness, with price breaking the previous descending Channel, while forming a wider larger channel of the same gradient in the process. Despite stochastic readings signalling a bull-cycle just a few hours ago, readings have failed to take flight with Stoch/Signal line both flattening and seeking lower pastures once more.

CFTC Commitment of Traders

Looking at US data, we can see a huge decline in Net-Commerical positions for bulls, which means the number of short holders are getting more and more. It is also important to note that Open Interest remain stable, instead of dipping, which means that current decline in Gold is supported by strong volume. This is not a flash sell-off, but a potential systemic change of demand/supply. We can all speculate why demand of Gold is falling – no US inflation risk, stocks recovery, US bond yields reversing etc, but the underlying empirically observation remains the same. With that in mind, it will be hard for Gold prices to climb back up easily – short-term reversals are still possible, but to expect Gold to suddenly fly back up above 1,500 back to 2012 levels will be highly unlikely to say the least.

More Links:
GBP/USD – Tries to Recover from Six Week Low Near 1.5160
USD/JPY Technicals – 102 intact despite early morning scare
AUD/USD – Finds Some Comfort at 0.97

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