Greetings!, After the type of move experienced in the precious metals markets Friday, we naturally expected to see a little bit of profit-taking today. That is exactly what happened as gold gave back only a little of Friday's gains as shorter-term traders took profits. The kind of move seen in Friday's trading activity after a weaker-than-expected jobs report was released revived the belief that the U.S. Federal Reserve might begin another round of stimulus, further easing our current monetary policy in attempts to boost the U.S. economy. One interesting note was the open interest on Friday's surge in gold. It suggests that much of the upside was due to fresh buying and the initiation of new positions in gold. Importantly, many analysts (including myself) believed that a large percentage of gains seen on Friday were due to short covering or the exiting of positions. According to George Gero, precious metal strategist at RBC capital markets global futures, said that if that had been the case, open interest would have decreased, which it did not. There is no doubt that some of Friday's upside is directly related to the closing of short positions. However, Friday's open interest rose by 12,179 contracts, certainly suggesting that traders were initiating new long positions in the market. As always, wishing you good trading Executive Producer |
