Gold needs to break above its wall of resistance soon in order to avoid a pullback from recently established longs getting nervous. This after having seen funds buy a record 124k lots during a two-week period to June 11 with most of that probably bought above $1,320/oz. However, the 33% (39k lots) increase in the net-long last week was primarily driven by a 26k lots of short-covering while fresh buying only accounted for 13k lots. It highlights the hesitancy of getting too aggressively long ahead of key resistance with some momentum buyers keeping their powder dry until after the potential break (above $1,380/oz) has occurred.
On that basis we are now witnessing a battle between strategic buyers versus tactical short sellers. A draw between the two is likely to be seen as long gold stays within a $1,320/oz to $1,358/oz range.
The biggest short-term risks to gold bulls are the potential for the US Federal Open Market Committee proving unwilling to meet the market’s expectations for aggressive rate cuts leading to a stronger dollar and/or a surprise trade deal announcement when Trump and Xi meet at the G20 in Osaka June 28-29. The silver net-short meanwhile was cut by 57% to 8.5k lots with the market struggling to get exited about the white metal despite trading at the lowest level to gold in 26 years.