Should you buy gold amid speculators boosting gold long?
- Speculators build up long gold positions
- A pennant formation points to more upside
- A new high is possible if the pennant breaks higher
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The investing world is searching for safe haven assets after the recent events in the banking sector. Gold has traditionally been one, so the recent bullish price action should not surprise anyone.
The question is – will the rally continue? Or the $2000 level will contain the bullish movement?
One thing is sure, though. Speculators boost gold long. The current net spec long in COMEX gold is about 22% of open interest, below levels seen in the past, meaning that there is still room to go for bulls.
Gold forms a possible pennant formation just below the $2000 level
The technical picture looks bullish. Gold failed to hold above $2000 twice, but after each trial, it had built up the energy to try again.
At the end of 2022, the market formed a falling wedge pattern. It pointed to an imminent reversal, and the price bounced from the $1640 area and rallied strong.
The moment coincided with the end of the US dollar’s rally. As a result, gold rallied as the dollar weakened against its G10 peers on its way up.
Currently, a possible pennant formation may be seen just below the $2,000 level. Round numbers are important psychological levels in financial markets, so the consolidation just below is not by chance.
Resistance at $2,080 might be tested; if it does, it is unlikely to contain the bullish price action. If the price of gold breaks out of the pennant formation, the measured move points to $2,160, meaning that the market will overcome resistance.
Summing up, gold looks bullish as a pennant formation points to more upside. However, traders should wait for a daily close above $2,000 before going long. On the flip side, a decline below $1,920 would invalidate the pennant.
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