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Gold Price Holding Strong in Anticipation of Bernanke FOMC Speech
Pinnacle Digest writes: Despite gold’s monstrous rally last week, it has managed to hang on to nearly all of its gains so far. Gold was expected to consolidate a reasonable amount this week given the lack of opportunity traders have had to solidify gains in recent months. However, according to Ben Traynor at Bullionvault.com, gold traders remain enthusiastic for the metal as they continue to anticipate further QE from the Fed.
It sounds like a broken record when traders explain that they are waiting for another announcement from Bernanke on the fate of QE3. Despite being disappointed for more than a year now (as Bernanke hasn’t implemented QE since 2010), traders continue to believe that “this time will be different”. Even the Harvard professor and market commentator Niall Ferguson seems to believe that Bernanke will announce some sort of asset purchase program this week (as he has no choice given the fledgling economy and job market).
"Expectations that the Federal Reserve will start fresh quantitative easing [QE] measures at this week's FOMC meeting [have] played a large role in keeping gold prices in close proximity to their recent highs," says a note from exchange operator CME Group.
Ben Traynor highlights a very important statistic in his latest article. He states that “Gold ETF holdings hits an all-time high at 72.4 million ounces Monday, according to data from Reuters, while the speculative net long position of gold futures and options traders on New York's Comex – measured as the difference between bullish and bearish contracts – hit its highest level since February last week.”
We aren’t stating that gold is peaking, but be nimble at this moment in time given the heightened participation in the precious metal market and the possibility that Bernanke could disappoint yet again. Gold is vulnerable to a significant correction. So, if your looking for a quick trade, gold may not be the best bet at this moment in time.
"With a good portion of gold's recent strength accounted for by the sharp increase in spec[ulative] positioning, this certainly raises concerns on the longevity of the [recent] move," says UBS precious metals strategist Edel Tully.
Click here to read Ben Traynor’s full article.
Did you read Pinnacle Digest’s Weekly Volume on August 13, 2012 which perfectly timed the bottom of the gold market? Click here to read.