The risk of short covering in gold remains elevated, says UBS. A large number of speculators are holding short, or bearish, positions in anticipation of a rate hike when the U.S. Federal Open Market Committee meets next week. “The upcoming FOMC meeting has been well flagged,” UBS says. “Market positioning suggests that the gold market has also been preparing itself for a Fed rate hike – net speculative longs are currently at the lowest in 14 years.” The most recent Commodity Futures Trading Commission data show gross shorts are at 93% of the record, UBS continues. “Extreme short positioning suggests that the risk of a more dramatic short-covering rally is currently elevated,
particularly if a rate hike is accompanied by dovish rhetoric.”
By Allen Sykora of Kitco News; asykora@kitco.com
