Speculative Short Positions Increase, Gold Continues Downward Momentum Confirmed?
Gold's short-term trend is expected to decline with resistance at $1930 and support at $1905. Last week, gold prices were weighed down by the lower-than-expected July CPI data released in the US. Additionally, based on CFTC positioning data and technical analysis, the medium to long-term bearish trend for gold remains unchanged, suggesting a potential continuation of the downward movement in the short term.
During last week (Aug7-13th), precious metals showed mixed performance, with gold declining by 1.2% and silver falling by 2.1%. The release of the July CPI data in the US, which came in below expectations, caused gold prices to fluctuate by approximately $15 before stabilizing around $1915.
Source: MacroMicro - Percentage Change of Major Precious Metal futures in the 2nd Week of August
Confirmation of Downward Trend in Gold due to Lower-than-Expected July CPI
On Thursday( Aug 11th), the US Bureau of Labor Statistics announced that the YOY increase in the US CPI for July was slightly higher than June's 3%, reaching 3.2%, but lower than the market expectation of 3.3%. The YOY increase in core CPI was 4.7%, showing a decrease from previous and expected values, marking the lowest level since Oct 2021. The main drivers of the rise in core CPI in July were increased housing costs, followed by automobile insurance and education. The decrease in airfare, used car prices, and healthcare costs contributed to easing inflationary pressures to some extent.
Market analysts believe that despite the recent moderation in US inflation over the past few months, the YOY inflation levels still remain above the Fed's 2% target.
The released US July inflation rate, which rose slightly to 3.3% and was close to market expectations, is broadly in line with forecasts. The market has expectations of a pause in interest rate hikes in September and the Fed maintaining high rates for a prolonged period. Combined with the bearish outlook for gold in the market and anticipated soft landing of the US economy, along with decreased safe-haven demand, there may be short-term downward pressure on gold.
Speculative Short Positions Aggressively Added to Bearish Gold Views
Recent speculative positions in gold have seen an aggressive increase in short positions. According to data from CFTC position updates, from Aug 2-8th, speculative long positions in gold decreased by 21,939 to 142,985 compared to the previous period. During the same period, in open gold futures contracts, speculative long positions also decreased by 10,139 to 228,846, while short positions increased by 11,800 compared to the previous period. These findings indicate that short-term market investors are bearish on the future of gold.
In summary, there has been a significant reduction in long positions and aggressive addition of short positions in the speculative market, indicating investor bearishness towards the future of gold. Gold may continue to decline this week.
From a technical indicator standpoint, the 60-day MA shows a downward trend. The RSI value on the 14th day is 37, which is below 60. At the same time, the MACD line, with its short-term period crossing down through the long-term period, shows a death cross. The gap between the lines is gradually widening, and the histogram is positioned below the zero line and gradually increasing in size. Both DIFF, DEA, and MACD are negative, indicating a bearish market for gold at present.
Source: Investing.com- Aug 14th Gold Daily Chart
Taking into account the analysis of various indicators mentioned above, the overall downward trend in gold's medium to long term hasn't changed, and gold's short-term outlook may experience oscillations and downward movements.
Additionally, investors this week need to pay attention to news and economic data that could provide guidance on the future trends of gold, such as the US July Retail Sales Rate, Housing Construction Permits, and the Fed Meeting Minutes.
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