Gold could experience ‘mother of all short covering’

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From Forbes:

Gold is back under the spotlight because of the renewed appetite amidst traders. This is primarily because of the rising geopolitical tensions and worries over the slowing global economic growth. The gold price traded near a two-and-a-half-month peak last week and is at $1,227 at the time of writing. Year to date, the price is down nearly 5.18%.

At the start of the year, gold was trading near $1,350 and hit the highest point of $1,366 on January 25th, 2018. Not many in the street were expecting the Fed to be aggressive with their monetary policy. However, the strength in the economic data and the robust growth in the U.S. economy made the Fed to fine-tune their monetary policy. The hawkish stance towards their monetary policy pushed the dollar index higher and this triggered the sell-off in gold.

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In other words, since January the price of gold has been out of luck and we have seen a clear downward trend. On August 16th, 2018, the yellow metal made a low of $1,160 but since then we have seen some serious changes in the price action because of the change in the underlying fundamentals. Anxieties around the trade war started to impact the sentiment and this triggered a profit warning by Wall Street analysts. On top of this, we also had the International Monetary Fund (IMF) coming out with a downward revision of the global economic growth. The bearish sentiment since then has picked up strength and many more hedge fund analysts have started to believe that there are more chances for a serious correction than a bull run.

On top of this, there are heightened geopolitical tensions between Saudi Arabia and the West due to the killing of journalist Jamal Khashoggi. This has put traders off from loading up major risk on bets in their portfolio. The situation is serious, and this has brought the special relation between Donald Trump and Saudi Crown Prince Mohammed Bin Salman under the spotlight. These geopolitical tensions are further anchored when we look at the mess created by Theresa May over Brexit. Italian budget woes just add the cherry on top . Simply put, the geopolitical tensions have started to make investors seriously worried about their portfolios and if we factor in the growth concerns over in China, it becomes clear why speculators have started to scale back from their short positions…

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Continue reading at Forbes…


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