SMM News: the price of gold rose $45 in two days, breaking through the level of $1320, rising to the highest level since March this year. It also won the key turning point pointed out by Goldman Sachs. Can the momentum of gold continue? How do traders build positions?
Gold has risen 1.7% since May, its biggest monthly gain since January. However, the latest CFTC data show that in the week ended May 28, net bullion holdings by hedge funds fell by 2117, bringing the net long position to 86688. It can be seen that hedge funds have been hit in the face again. As of Friday, gold holdings in the world's largest gold ETF SPDR gold trust had risen just 0.3 per cent to 743.21 tonnes.
The main reasons behind the rally include the risk aversion effect of the global stock market crash and the overall rise in precious metals as a result of falling energy prices. In addition, market expectations for the Fed to cut interest rates have also supported the rise in gold prices. Fed fund futures show that the Fed is 86 per cent likely to cut interest rates once by September, while Eurodollar futures suggest they may cut interest rates twice.
The recent trend in the foreign exchange market has also helped gold break through its support level of 1266. At present, the dollar is weak, the euro / dollar hovering above 1.10 level, the dollar / yen is difficult to break the upper limit of 112.
The ISM manufacturing index, released yesterday local time, was also unsatisfactory, reaching a nearly two-and-a-half-year low. Last week, the manufacturing PMI index also reached a 10-year low. Rising prices could herald the beginning of a new round of stagflation.
What about the trend of silver? Is silver, which has been in the doldrums for a long time, finally coming back to power? In fact, silver prices have also picked up quickly.
But gold continues to outperform silver, with a gold / silver ratio of nearly 90, nearing its highest level since 1993.
Goldman Sachs has previously said $1307 is a key turning point for gold, which they see as resistance to gold prices, but in fact, gold has broken through that level and has risen for two consecutive trading days. "if the price of gold rises above 1307, the next resistance will be 1330," Goldman said. This breakthrough may mean that gold has returned to the rally that was interrupted in January. "
At present, fundamentals are very good for gold, so the key question now is, will this rally be as fleeting as it used to be, or will it continue? How should traders build positions?