Gold should push higher


The latest futures market activity (according to the CFTC data) puts the net long speculative position in gold at 31.5% of open interest. This is a substantial jump from 25.6% the previous week.
While this jump in speculative length seems big, the market for gold still does not look overextended. The two-year average position of net speculative longs relative to open interest is
33%, with the maximum at 42% and the minimum at 23% over this period.

Our strategic view remains unchanged: stay long gold. In our gold model, global liquidity is central to deriving gold’s “fair value”. With global liquidity still rising, gold should push higher. Global liquidity is being driven not so much by the Fed anymore, but increasingly by government borrowing.

For gold, support is at $1,528 and $1,515. Resistance is at $1,550 and $1,558.

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