Gold increases pressure for hope of virus treatment

 Gold climbs modestly on Thursday by $1.26 per ounce or 0.07%, being traded at $1.713.99 per ounce. During this year, the yellow metal accumulates an advance of 12.98% (YTD).

 The main reason for Gold's rise this year is mainly the accumulation by concerned investors about the economic consequences of the lockdown and the spread of the coronavirus. 

Furthermore, the COVID-19 spread and the closure actions taken by all major economies demanding yellow metal, such as China and India, have impacted both trade and the supply chain.

On the other hand, the net positioning of speculative traders shows a reduction in their buying pressure. The next weekly chart of the yellow metal shows the net speculative positions published every Friday in the CFTC report.

From the chart above, it is observed that speculative participants recorded their record high in net positioning, reaching 353,649 contracts in the second half of February. This level coincides with the period in which the stock market began its massive sell-off.

 The reduction in speculative positioning leads us to suspect that the yellow metal could have reached a ceiling and should begin a corrective process.

From an Elliott wave perspective, Gold could be developing a long-term bottoming sequence that could correspond to a wave A of Minor degree labeled in green.

Gold, in its 2-hour graph, shows the sideways movement that began with the high of April 14, when the yellow metal reached $1,747.72 per ounce, thus completing a wave ((b)) of Minute degree identified in black.

Once the wave ((b)) was completed, the yellow metal violated the upward guideline joining the ends of the waves ((a)) and (b) in blue. This bearish movement leads us to validate that the upward movement corresponding to wave ((b)) ended, and consequently, the wave ((c)) should begin.

Currently, we observe the price action developing a structural series corresponding to a wave ii of Subminuette degree labeled in green, which could belong to the wave (iii) of Minuette degree.

This movement leads us to suspect that the yellow metal could start a massive sell-off in the coming trading sessions, which could be accelerated by the hopeful results obtained by Gilead Sciences of treatments against the coronavirus.

In conclusion, considering the reduction in speculative positioning and the short-term structure illustrated by the yellow metal, our preferred positioning remains is on the short side.

 

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