Gold to Head Lower Still, Goldman's $1,050 a Key Support Level

After Monday’s bounce in the gold market, gold traders are still using the $1,050 support level set by Goldman Sachs back in 2013 as a key level for their trading.
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After Monday’s bounce in the gold market, gold traders are still using the $1,050 support level set by Goldman Sachs back in 2013 as a key level for their trading. Thomas Vitello, partner at Aurum Options Strategies, told TheStreet that the gold market has quieted down since Monday’s bounce, however he thought that the bounce was not very surprising given that the market is currently full of short sellers. Similarly, with a market full of short sellers, Vitello says that ‘we’re not seeing the collapses we saw in 2013’ because there was ‘a big overhang of longs’ in the 2013 market and ‘now the market is quite the opposite.’ While Vitello believes that ‘the market can go lower,’ he is not expecting to see a ‘real collapse’ to happen in just one day. Vitello says that both the $1,050 support level set by Goldman Sachs (GS) in 2013 along with the $1,030 value that gold hit two or three times after its 2008 rally from $700 are still very important numbers for gold traders. ‘If it breaks $1,000 all bets are off.’ Vitello said. ‘You will have a lot of old longs who are underwater maybe taking another look and they may bail.’ HSBC (HSBC) recently lowered its gold price forecasts for this year and next, citing a drift toward Fed tightening, inflation, and a strong dollar as its key reasons for the downgrade. However Vitello says that these key factors ‘are priced in already,’ and adds that he sees ‘a big overweight short position in the market in terms of the funds.’