Gold Bulls Gain Momentum, Though New Highs Seems A Stretch

Gold Bulls Regain Momentum

At the end of October, I warned that gold looked set to retrace higher and recover some of its losses from the record high. While bulls dragged their heels initially, they finally regained control of prices with conviction on Monday.

Gold futures jumped 2.8% at the start of the week, marking their best daily performance in three weeks. While we’ll likely see the usual extrapolation of this move and fresh calls for new highs, I doubt we’ll get a clean run from here given current positioning in the options market.

View related analysis:

Options Market Shows Lack of Confidence in Gold’s Bounce

The lower panel shows 25-day risk reversals for gold over the next week (blue histogram), month (blue line), and three months (gold line). The negative print for the 1-week tenor indicates stronger demand for puts (bearish bets) than calls. The fact that it moved further into negative territory on Monday while prices rallied suggests traders are paying a premium for downside protection — hardly a show of confidence among options traders.

Meanwhile, the 1- and 3-month risk reversals remain positive, showing bullish bets (calls) still outweigh bearish ones (puts) over those horizons. However, neither rose alongside prices on Monday, implying limited conviction in sustained gains over the one- to three-month outlook.

Chart analysis by Matt Simpson - data source: Source: LSEG Workspace

Gold Futures (GC) Technical Analysis

The daily chart shows gold rallying into a prior weekly volume point of control (VPOC), with bulls now eyeing a potential break above 4200. However, with the daily RSI (2) at its most overbought level in months, upside momentum may begin to slow. A sustained break above 4200 would likely see bulls targeting the 4300 area near the monthly pivot point.

Given the sharp selloff from the record high, I still view the current advance as a corrective bounce within a broader downtrend. I’m therefore watching for signs of a swing high forming between 4200 and 4300, anticipating at least a retest of 4000. A break beneath that level would expose the 3890 weekly VPOC and the 3800 handle as possible downside targets.

Chart analysis by Matt Simpson, Source: TradingView, COMEX Futures, Gold

View the full economic calendar

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

How to trade with City Index

You can trade with City Index by following these four easy steps:

Open an account, or log in if you’re already a customer

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
Search for the market you want to trade in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

Delayed London Stock Exchange (LSE) Data

The London Stock Exchange (LSE) market data displayed or referenced on this website is provided on a delayed basis and is not in real time. The delay period may vary but is typically at least 15 minutes. This data is intended for information purposes only and should not be relied upon for trading, investment, or other financial decisions. We do not guarantee the completeness, reliability, or suitability of the data for any particular purpose. Users should consult real-time data sources and obtain professional advice before making any financial decisions.