Gold Outlook: Bulls Eye Rebound, Though Futures Exposure Remains Weak

Gold continues to show tentative signs of at least a cheeky bounce, although for now it remains suppressed by a stronger US dollar. Still, with demand emerging at lower levels and bulls gaining the upper hand into Friday's close, I am on the lookout for a rebound this week. However, without a catalyst to significantly weaken the US dollar, it is difficult to envisage a sustained bullish trend developing for gold—especially when we factor in the cautious signals coming from both options and futures traders.

View related analysis:

Gold Rebound Hopes Build Despite Weak Futures Positioning

The technical backdrop for gold has improved in recent weeks, with prices repeatedly finding support around 4,400 and momentum indicators beginning to turn higher. Yet while price action hints at a rebound, futures and options positioning suggest professional traders remain sceptical that gold is ready to revisit its record highs.

Gold COT Report: Futures Positioning Remains Cautious

It is difficult to become overly bullish on gold when looking at gold futures positioning and the latest COT report data. Net-long exposure among large speculators has fallen to 154k contracts, its lowest level in two years and two months. While asset managers' bullish exposure has risen slightly, it remains well below its September 2024 peak at just 97k contracts. Moreover, total open interest has plunged to levels not seen since 2009.

Ultimately, professional traders remain cautious following gold's runaway rally to record highs above 5,000, and they appear in no rush to push prices back towards those levels.

This picture is also reflected in the options market, where risk reversals point to stronger demand for puts than calls. The 1-week 10-delta risk reversal shows traders continue to price in downside tail risk, while institutional investors retain a preference for downside protection across longer-dated maturities.

This does not mean gold cannot rally, but it does suggest the market currently lacks strong support from large speculative and institutional participants.

Source: COMEX, CFTC (COT), LSEG

For traders wanting a deeper understanding of futures positioning, I’ve also published a guide on how to read and interpret weekly COT data in forex markets.

Gold Futures (GC) Technical Analysis

Gold Finds Support at 4,400 as Bulls Regain Control

Prices are sitting around the midpoint of the 4,000–5,000 range, although price action suggests gold may be attempting to rally from current levels. A long-legged bullish pin bar marked a prominent swing low in March near 4,200 and closed firmly back above the pivotal 4,400 level. While gold prices drifted back towards 4,400 in recent weeks, another bullish pin bar formed last week, with its low once again respecting support around 4,400. Adding to the bullish case, a bullish divergence has formed on the weekly RSI (2) and prices held above the 50-week SMA.

Gold Bulls Eye Move Towards 4,800

Zooming in to the daily chart reveals a false break below the March daily-close low on Thursday, while once again respecting support around 4,400. A two-day rally followed, generating a low-to-high gain of 5.3%. Volatility has since receded this week, although gold prices continue to hold within the upper half of that two-day advance.

Bulls could seek dips towards the March daily-close low in anticipation of a break above last week's high, potentially opening the door for a move towards 4,800 near the May highs and the monthly R1 pivot point.

Source: ICE, TradingView

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-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

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