XAUUSD Gold Forecast: Physical Gold vs Paper Trading

XAUUSD Gold Forecast: Physical Gold vs Paper Trading

Altough the FED’s “buy everything” policy helped Gold prices to break above 1580 $ ,the main reason to surge in Gold prices was the physical Gold delivery issue as I mentioned a few days ago.

The issue has accelarated by the news “Three Swiss gold refineries suspend production due to virus threat”

Yesterday afternoon, news was on wire – Bloomberg Terminal -: LBMA OFFERS TO HELP CME GROUP FACILITATE GOLD DELIVERY

Here we go now:

1. Gold’s prices could not break and close above 1656 $ yet. This may indicate deflationary risks and a liquidity trap.

2. Due to the covid shoutdown , the delay between physical deliveries and the spread between the spot and the futures – I have posted the CME futures yesterday –  is up to 50 USD.

Since London and America are both closed, the issue of delivery in April may be interesting. The physical equivalent of 195,604 active future contracts corresponds to 19.6 million physical gold. As of now, there are 8.7 million ounce reserves in  Comex warehouses.

On the other hand, CME increased its initial collaterals by 19% in gold contracts yesterday. Thus, the initial margin, which was $ 8,350, increased to $ 9,185. Thus, the initial collaterals for futures contracts, which were $ 5,000 in January, were increased for the 5th time. This will cause investors to bring additional collateral if the options that expire next week return to Futures contracts in the money. The additional margin requirement may cause a dissolution in the gold long positions

Summary:

Increasing initial collaterals in gold active futures contracts could prevent investors from taking new long positions. If the options to expire in the next week turn into futures contracts, the additional coverage requirement and forward deflation expectations may result in tougher sales.

Technically:

We have already short positions at 1622.

We have 2 Big Short Levels:

1. Potential test of 1680 $
2. Closing below 1590

Our Targets: 1550 1500 1450 1380

Wait for the new week to trade GOLD.

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