Can the Gold Bounce Last?


The shorts are feeling the squeeze, but can the bounce in gold turn into a true rally?

Gold is trading higher this Monday morning, and above the important $1,424 to $1,428 level. In the morning session, it reached our next resistance point, when it hit a high of $1,437.40.

So why is gold getting bid up?

Actually, it's pretty simple. With Friday's price action providing a close above $1,400, investors and traders are using the more stable price action as an opportunity to hunt for value. With headwind resistance levels at $1,437.50, $1,447, and $1,455.80 to $1,458.5, the major upside target will ultimately be $1,474 to $1,478.

(Read More: Gold Rises as Buyers Swoop; Gains May Be Short-Lived)

Option expiration is this week, and many investors who protected long exposure by using put options or speculated short positions will be looking to close these options by buying futures or outright exiting the puts, which will help the market to bounce. This recovery, although strong this morning, is likely a consolidation rather than a reversal.

(Read More: When Will Investors Fall Back in Love With Apple and Gold?)

The bottom line: Look for a close above $1,455.80 to $1,458.5 to encourage more buying. A failure to close above $1,424 to $1,428 will be discouraging to the bull camp, and a new low on the session against $1,403.50 will be very bearish.

Watch "Futures Now" Tuesdays & Thursdays 1 p.m. ET exclusively on FuturesNow.CNBC.com!

Like us on Facebook! Facebook.com/CNBCFuturesNow

Follow us on Twitter! @CNBCFuturesNow

Contact Futures Now

  • Showtimes

    Watch Futures Now Tuesdays & Thursdays 1p ET exclusively on cnbc.com!

Sponsor Links

  • CME Group brings buyers and sellers together through its CME Globex electronic trading platform and trading facilities in New York and Chicago.

  • Take your trading to the next level with a platform that lets you trade stocks, options, futures and forex all in one place with no platform or data with no trade minimums. Open an account with TD Ameritrade and get up to $600 cash.