Long dollar strategies have become more risky than long gold – MKS

(OroyFinanzas.com) – To begin with, the surprises regarding the metals rally momentum have been very supportive, especially with the cyclical leg of the ´weak-dollar story´ gradually emerging. Nevertheless, the market consensus has so far largely resisted any de-rating of the dollar. In translation, there remains ample short-term uncertainty about GOLD/DOLLAR trajectory, long dollar strategies have become more risky than long gold.

Both Europe and US maintained a bullish bias following last week’s breakout above the key 610 and 12.00 resistance zone. On contrary, we’ve seen Far East dishoarding scraps into ovens. For the short term view, today’s price action for gold and silver represent impulsive rally and pulled back. Gradually approaching initial resistance at the 630.00 and 12.80 area, is a bullish setup for an extension into the 650 and 13.00 target zone for soft landing. If not a deeper test of turbulence around the 675 and 13.50 area. In that regard, we noticed the prices have effectively maintained the channel advance from the late-October low, with the 610 and 11.50 now acting as key support.

However the increasingly bullish stance towards the crude and the metals, are reflecting in the flow – while overall market positioning still appears to be very long by funds and speculative investors. And we continue to believe that the market will realize, sooner rather than later, that traders are heading towards a substantial slowdown into year end. In that interim, we cannot deny the risks posed by an unwinding of these positions.

While the demand and supply for physical gold looks stable, downward risk could come from a strengthening dollar and falling crude prices. The rally will be mainly driven by increasing jewelry demand ahead of Christmas and also due to the ongoing Indian marriage season.

MKS Gold & Silver, Daily Report
by Bernard Sin

© OroyFinanzas.com

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Marion Mueller

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