December gold futures have held up quite nicely given the recent surges in the stock market and the easing of trade tensions with China. Although the rhetoric could easily heat up once more between Trump and Xi, for now, it appears Trump wants to stop the stock market whip saw and get us marching back to the highs. There are a number of factors that are weighing on gold prices right now, and this is everything from the 4-week high’s seen in the U.S. dollar index to the still positive U.S. economic data that has been coming out for months. The trade tensions on pause and an already heavily long speculative managed money position is leaving us running out of steam now that we’ve had a $120 rally over the course of August. The record managed money long position has likely been broken, but we won’t know for sure until today’s COT report comes out. 288,000 contracts long is quite heavy indeed, and for another 100,000 contracts to be added we need more whipsaw in the stock market and more tension between the U.S. and China.
The December contract is testing the upward trend we’ve been in since August 1st. A break of this trend could threaten the August rally, and considering I’m not the only one watching the gold technicals there are a lot of traders long gold according to the COT report. When everyone is on one side of the trade a rush to the exit could trigger a washout below 1500. New catalysts to be bullish the precious metal need to be seen, and quickly. If you would like more information on how to play gold at these levels please contact me directly.