Short Squeeze in Gold Stalls at Trend Resistance

Gold futures have been very volatile to start the week thanks to multiple catalysts in the market. Futures initially fell yesterday as Swiss voters rejected a proposal to increase the central bank’s gold holdings. But then news broke that India, one of the world’s largest gold consumers, lifted trade restrictions on gold imports, causing futures to reverse morning losses. Then, yesterday’s rally extended as investors bought up the precious metal as a “safety asset” after the downgrade of Japanese debt by Moody’s.

A massive short squeeze then ensued that pushed gold through $1200, but as with most short squeezes, there was little conviction and this morning gold is back down through $1200/oz. Gold remains very volatile at these levels, and we maintain a general downward bias short term as the dollar remains strong.

The technicals confirmed that position on the charts early this week as the trend-line drawn from the August highs across the top of the highs of the last short squeeze (that occurred in late Sept.-early Oct.) halted this weeks rally. .

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