(Kitco News) - April Comex gold futures settled higher for the fourth week in a row on Friday. Positive signals are emerging from the speculative and managed money crowd—who are showing interest in the yellow metal once again.
"Physically backed ETPs rose by 7.4 tonnes on Friday (driven by SPDR), the first inflow in almost a month and the largest daily inflow since 31 January last year," according to Barclay's analysts.
Additionally, the CFTC's Commitment of Traders report released on Friday revealed that in the first week ended January 14, managed money traders added 5,644 long positions to their gold futures holdings, according to the disaggregated report. This represents the fourth week in a row that funds have added to long positions in gold.
What does this show? Speculators are jumping back on the gold market wagon.
April gold futures have climbed to a key zone—the December 10 swing high at $1,266.70 (see Point A on Figure 1 below). This is an important technical chart point, but also the last high before the Federal Reserve announced it would begin tapering its monthly bond purchases.
That level also nearly coincides with a declining bearish trendline off the August high, seen in red on Figure 1 below. If the bulls were able to bust above that trendline near term, it would signify a trend change and turn the intermediate term outlook bullish as well. The trendline is declining each day, but came in around $1,275.60 on Monday and on $1,273.80 on Tuesday.
The $1,266-1,275 zone is a major resistance area. If the bulls are able to break through that zone in a sustained way in the days ahead it could potentially unleash a strong buying wave, driven in part by technical and momentum traders.
An initial upside target lies at the $1,294.80-1,300 per ounce zone, if an upside breakout is achieved. But more substantial gains could be seen in the days and weeks ahead if the trendline is broken.
Kira Brecht is managing editor at TraderPlanet.
By Kira Brecht, Kitco.com
Follow her on Twitter @KiraBrecht