Open Interest and Volume are both rising together on the daily chart in Gold, which historically has been healthy for a continuation in the trend. See right hand side 6 month daily chart below. I don't have any near term resistance other than the round number 1,800.

The 30 minute chart, see left hand side below had two 30 minute bars with approximately 50,000 contracts traded in the past six trading days. 

Open Interest increased in Gold futures 5,594 contracts yesterday, so this rally is NOT primarily "short covering". You cannot have an increase in short covering with open interest rising. New shorts on a NET basis are being placed, with new longs, and this is more firework potential in a rising trend. See right hand side chart below.  (I have a tab at the top of my blog with my interpretations of Open Interest.)

The bears that are holding leveraged short positions are in a really bad spot here on the chart.

"Hoping" for manipulation, is not a good strategy if you are not "in the know". Those who trade with leverage and "hope" a short trade comes back, ignore chart signals, or use poor risk management a majority of the time send their trading account to the financial "graveyard" quick.

Some consolidation for a few days would be optimal in my opinion.

View a larger chart here.

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-- Posted Friday, 14 September 2012 | Digg This Article