Gold's Local Minimum: A Magnet for Price Action?

11月2日

So, the trading week is behind us, and it’s time to kick back a bit, assess the price action, and build a trading plan for the upcoming week, keeping the main drivers in mind. Today, let’s focus on Gold.

Looking at the COT reports: there’s a divergence between the positions of the Commercials and the movement of the underlying asset.
What does that mean? It suggests that hedgers don’t see the need to increase their hedge positions (in the case of Gold, that means short positions). The interpretation here is that there’s a high probability of a correction in the underlying asset.

Retail positions show an average aggregated long position around $2707 (according to open-source data). So, for now, the average positions are in the green, which means the bulls are feeling good, but that’s not all... Remember that level $2707; we’ll come back to it later.

The options sentiment is mixed, with some repositioning in portfolios targeting both up and down, but with a slight bias. The specifics of these adjustments tell me that a correction is expected, but overall, the options traders still see the trend moving upward.

Now, let’s take a look at the chart and summarize.
Remember that level $2707 I mentioned earlier? Let’s find it on the chart. Oops... turns out that’s a local minimum. So, here’s the deal: there’s a level with liquidity (open positions + local minimum), in other words, we have a "magnet" that will definitely attract the prices.

Personally, I stick to a trading strategy of not trading against the trend, even if a correction is confirmed by my analysis. But for some, that potential downside might look appealing enough to open a short position.

Good Luck and Have a Nice Weekend!