Gold prices could be in store for the “mother of all short-covering” rallies, said one analyst, citing CFTC short positioning and the yellow metal’s strength in the face of higher U.S. dollar.
Even $1,500 is not out of the realm of possibilities, according to ThinkMarkets chief market analyst Naeem Aslam, who sees the latest CFTC data as a positive sign for gold prices.
“The recent CFTC data showed that hedge funds have decided that it is about time for them to start scaling back from their short position. This sends a strong bullish signal for the metal,” Aslam wrote in a report published on Monday.
Making things even more favorable for gold prices is the “capitulation factor” in case the Federal Reserve changes its mind on how aggressive it wants to be when it comes to monetary policy tightening.
“After all, Donald Trump has criticized the Fed several time about hiking the interest rate so many times this year. It is important to emphasize that back in 2015 when speculators had net long positions, it triggered a 30% move in the gold price. A similar move would help the price to move to $1,500,” Aslam added.
Another sign that things are looking up for gold is the metals’ strength in the face of higher U.S. dollar.
“During the past few weeks, we have seen a positive correlation between the dollar index and the gold price. This shows that gold price has become immune to rise in the dollar index. This simply means if we see any kind of pullback in the dollar index, the odds are higher for a mammoth move in the gold price,” Aslam explained…