Gold Remains Range Bound
The gold market remains stuck in a tight trading range as it has for weeks now. The market is stuck sideways may not be a negative, however, and could be a big positive. Recent data from the CFTC showed that the amount of speculative interest in gold has declined to the lowest level in three months. The shift in gold positioning was not a huge surprise, however, as investors awaited the latest decision on rates from the FOMC. That meeting took place last week, and the Fed elected to stay on hold but suggested two more rate hikes would be seen this year. Despite not raising rates again last week, the Fed’s language was decidedly hawkish.
As the number of bullish gold specs declined, the gold market remained in a tight range from $1,950 to $1,980. The Fed’s hawkish pause last week did cause gold to fall, testing $1,930 in the process. The metal did not stay down for long, however, and shortly after testing $1,930 was back in its previous trading range. The price action seen in gold would seemingly suggest that there is still significant bullish interest in the market, but investors are perhaps being more tactical about how they go about building a position.
The gold market is possibly seeing some bullish support from a lack of faith in the Fed’s bullishness on interest rates. Despite suggesting that multiple rate hikes will be seen this year, some may be doubting the Fed’s desire and determination to raise rates. Some even feel the next Fed move may be more likely to be a rate cut rather than a hike. This opinion may increase if worries over a recession continue to mount in the months ahead. Whatever the case may be, however, gold has done a good job of holding onto some recent gains and has thus far not appeared overly vulnerable to the downside after a lack of upside follow-through. Of course, the longer gold is unable to mount a fresh offensive, the more likely it may become that the bears take control of the market.
The bulls need to show some strength before speculative interest in the metal increases again. That means the metal may need to attack the $1,985 level before attracting fresh bulls into the market. A close above the $2,000 level would almost certainly reignite the bulls, and the market could then be off to the races. A close below the $1,950 level may have the opposite effect, attracting fresh bears into the market who may push the metal for a test of the $1,900 level.
The market has many potential catalysts for a move up or down. The Federal Reserve and its plans for interest rates, the war in Ukraine, the potential for a Chinese takeover of Taiwan, and other factors may all influence the gold market in the months ahead.