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Gold Poised for Long Liquidation

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Gold Poised for Long Liquidation

Gold prices have declined slightly more than 5% in the past 8 trading session and are now resting up against support levels. In the latest week hedge funds added to long position and reduced short postion according to the latest industry report, which could lead to a long liquidation. Interest rates continue to face upward pressure from bond tapering which could generate additional headwinds for the yellow metal.

Prices have declined and are now hovering near a 38% Fibonacci retracement level which is measured frm the lows made in early January to the highs made in mid-March. The next level of target support on a break of 1309 is 1,284 and then 1,266. The Fibonacci retractment measures the 38%, 50% and 62% retracements of the latest moves.

Hedge funds continued to add to long postiion and reduce short position in gold futures according to the latest industry report. According to the commitment of traders report released for the date ending March 18, 2014 managed money increased long gold position by approximately 7800 contracts while reducing short posiion by 7500 contracts. Longs outweight shorts in gold futures by 151K to 13K, which could generate an additional long liquidation, if support levels are breached.

Momentum on gold is negative as the MACD prints at its lowest level in the past 12-months, with a negative sloping trajectory. The RSI moved lower with price action reflecting accelerating negative momentum.

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