Gold severely tested in liquidity crunch, gaps higher on Fed rate cut

Gold Technical analysis, overview, strategies, and levels

Tempting as it was to label the moves towards $1,700 and its technical overview as a bull trend, last week’s Weekly overview remained volatile, and in turn meant that conformist breakout strategies in either direction could outperform. Outperform it did with its price crashing through both 1^st Support and 2^nd Support levels, and aiding conformist strategies at the expense of reversals. Although equities were in freefall, safe haven weren’t spared the rout later in the week as the liquidity crunch spread to engulf other asset classes, and the US dollar was an outperformer in the FX market.

IG client^* and CoT sentiment for Gold

Retail bias here has surged to extreme long levels no doubt squeezed by the recent moves, and while gold long positions have dropped by 29,883 lots and shorts by 9,681 lots according to the latest CoT (Commitment of Traders) report, putting in percentage terms has taken the bias a notch higher to an extreme long 90%.

Gold chart with retail and institutional sentiment

Silver Technical analysis, overview, strategies, and levels

As bad a week as it was for gold, it was far worse for silver registering a double-digit percentage decline against the surging US dollar and in turn taking the gold/silver ratio to fresh highs breaching the 105s as of this morning. That was in line with its volatile technical overview, and aiding conformist breakout strategies to the downside for a break beneath last week’s Weekly (and Daily) support levels.

IG client^* and CoT sentiment for Silver

It spells bad news for both retail and CoT speculators however, with the former increasing their extreme long bias to 94% (the bulk of those longs initiated well above market price) and the latter unchanged at a heavy long 71% with a reduction in both silver long and short positioning (as was the case for gold), to the tune of 7,453 and 4,097 lots respectively.

Silver chart with retail and institutional sentiment

Oil WTI Technical analysis, overview, strategies, and levels

Although oil prices started last week with a massive gap lower, the intraweek moves offered both a conformist breakout and a contrarian reversal. There are plenty of factors here, the negative ones being transportation set to plummet even further as travel bans rise and more countries go into lockdown, as well as reports that Saudi Arabia was snapping up oil tankers ahead of its plans to flood the market with more oil. Geopolitical tensions failing to subside and shale companies in need of liquidity are a couple factors that could offer a supply shock. In oil data, Baker Hughes was little changed, increasing by 1 to 682 from the week before, though expect those figures to get tested severely should current price levels in oil persist.

Learn more about oil trading.

IG client^* and CoT sentiment for Oil WTI

In sentiment, retail bias has dropped since the start of last week, as has CoT bias with sizeable similar 24K lot increases in both long and short positioning.

Oil WTI chart with retail and institutional sentiment

*The percentage of IG client accounts with positions in this market that are currently long or short. Calculated to the nearest 1%, as of today morning 8am.

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