Gold Bounces Higher Amid Quiet Accumulation

Gold prices have dropped nearly 30% from their January record high but bulls continue to defend support around the $4,000 area. While the broader trend remains bearish, improving futures positioning and constructive price action suggest that quiet accumulation may be underway, raising the prospect of a bullish breakout.

The weekly gold futures chart shows the sideways range it has traded within over the past few weeks, but subtle clues of bullish accumulation appear to be forming. Risk reversals are moving higher, suggesting demand for calls is outpacing demand for puts. Put differently, demand for downside protection is now lagging despite prices failing to move lower.

The daily chart shows a strong gap higher from Wednesday's close around the $4,000 area, which suggests that gold bulls have been quietly accumulating around these cycle lows. With prices now attempting to extend gains from the monthly pivot point, bulls may be targeting a move towards $4,200. If the US dollar is forced lower alongside the Japanese yen in the coming weeks, it could also allow gold to break above the monthly R1 pivot and head towards the 200-day EMA around $4,300.