Gold remains under pressure as bearish momentum builds and futures traders trim long exposure. With prices now within striking distance of 4,000, bears may remain in control near term, although the major psychological level could prove difficult to break and provide the foundation for a rebound.
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Gold Bears Eye 4,000 as Futures Sentiment Weakens
Gold Futures (GC) Positioning | COT Report
While traders remain net-long on the CME gold futures market, their confidence is waning. Both large speculators and managed funds have trimmed their longs over the past five weeks, though not by an aggressive amount. However, managed funds increased their gross shorts last week, while large specs have done so for the past two. Again, only by marginal amounts, but it shows a shift in sentiment towards the gold market.
Options traders have also increased their bearish view slightly, with risk reversals moving increasingly below zero to show demand for puts outnumbering demand for calls. These are not grisly levels of bearishness, and that may be because 4,000 is a big level to break. And one I suspect will hold initially and prompt a countertrend bounce over the near term.
Source: CFTC (COT), COMEX, LSEG
Gold Futures (GC) Technical Analysis
A closer look at the weekly chart shows bearish momentum increased last week, with gold now trading less than a typical week’s range from 4,000. That puts the level within striking distance, although such a big round number could prove difficult to break cleanly and potentially trigger a volatile shakeout before a countertrend bounce.
The US dollar probably needs to stop accelerating before we can assume a meaningful low for gold. While DXY momentum still points higher, it formed a shooting star below 102 to hint at early signs of fatigue. So perhaps gold’s latest leg lower is nearing its end.
The daily chart remains bearish overall after Thursday’s outside day, although prices are holding above last week’s low. The 4,200 area could be reclaimed over the near term, but bears may look to fade rallies towards the monthly pivot near 4,300 and the 200-day EMA at 4,331.8. On the downside, note the high-volume node (HVN) at 4,082 and the 4,100 handle as potential support ahead of 4,000.
Ultimately, my bias is for bears to fade rallies towards 4,000, where gold seems more likely to find support and stage a decent rebound. That would also allow time for the US dollar to form a near-term top and provide gold with some breathing room.
Source: COMEX, TradingView
