Gold Price Prediction – Gold Consolidates as Hedgefunds Sell Long Positions

Gold prices edged higher on Wednesday but continue to trade sideways. The dollar was nearly unchanged and US yields barely moved which led to a tone of consolidation. In the latest week, hedge funds exited from positions in futures and options, which is providing a headwind. Brexit should continue to provide ample volatility for the yellow metal. Johnson’s victory appears to have put off a Brexit until early 2020 but could give the UK PM the timeline he needs for a victory.

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Technical Analysis

Gold prices moved higher but continue to remain rangebound with support near an upward sloping trend line that comes in near 1,480. Additional support is seen near the 100-day moving average at 1,459. Resistance is seen near the 10-day moving average at 1,489, and then a downward sloping trend line that comes in near 1,506. The consolidation is building up energy which is what generally occurs ahead of volatility. Short term momentum has turned negative as the fast stochastic generated a crossover sell signal. The fast stochastic is printing in the middle of the neutral range. Medium-term momentum is negative to neutral. The MACD histogram is printing in the red with a flat trajectory that points to consolidation.

Brexit Lingers

Boris Johnson’s Brexit deal was approved but the timeline was not, leading to a delay and maybe general elections. While a delay to the end of January is the likely outcome, it will provide the necessary timeline for Johnson to seal a victory. The Tories have gradually improved their standing in the polls and now has around 35% of support compared to 25% for Labour, according to sources.

According to the latest report from the CFTC, hedge funds sold nearly 26K contracts while increasing short positions by 6K contracts. The number of long contracts that are outstanding are nearly 10-times the number of short contracts that are outstanding in the managed money space.