02.04.202411:13 Forex Analysis & Reviews: XAU/USD: Gold market is building a strong base, hedge funds continue to support prices

According to the latest data from the Commodity Futures Trading Commission (CFTC), as precious metal prices continue their upward trend, the gold market is building a strong base, although bullish speculative interest among hedge funds is gradually slowing down.

The detailed CFTC report on trader commitments showed that for the week ending March 26 on the Comex, capital managers reduced their speculative long positions in gold futures by 9,582 contracts to 163,006. At the same time, short positions also decreased to 27,211 contracts, by 2,481 contracts. At the moment, gold has net long positions totaling 135,795 contracts.

Despite the fact that the speculative position has not changed over the past two weeks, this is the first decrease in speculative position since the end of February, just before gold began its record-breaking rise.

The gold market gained even more momentum after data on personal consumer spending in the U.S. showed that inflation is not a serious problem. And the Federal Reserve will begin its easing cycle in June. On Friday, due to the Easter holidays, markets were closed, and traders could not immediately react to inflation data.

This quiet rise is extremely encouraging for gold investors. Especially since it is an inexhaustible bull market.

Gold's constant ability to withstand obstacles from the dollar and yield fluctuations is simply impressive. And this underscores the fact that the gold market continues to attract demand, making it relatively easy for hedge funds to protect their huge long positions.

It is also worth noting that broader factors in the market will continue to support speculative interest—this is insatiable demand from developing countries, led by Asian investors.

From a technical point of view, the stable breakthrough of the $2,200 mark, which occurred last week, and the subsequent rise above the previous record high, around $2,223, was seen as a new stimulus for the bulls. This, in turn, confirms the short-term positive forecast and suggests that the path of least resistance for the price of gold lies upward.

However, the Relative Strength Index (RSI) on the daily chart demonstrates an overbought condition. Therefore, before preparing for further breakthroughs, waiting for some short-term consolidation or moderate pullback would be reasonable. Nevertheless, the price of gold seems poised for further growth and will reach the round level of $2,300.

And any corrective pullback is more likely to attract new buyers around $2,223. This will help limit the decline of the XAU/USD pair around the $2,200 mark, which is now considered a key support level. A convincing break below the latter may trigger technical selling and pave the way for a significant decline.