Tags: gold | rally | short | squeeze

Experts: Gold Poised for Massive Short Squeeze

By Dan Weil   |   Saturday, 25 Jan 2014 05:04 PM

With gold reaching a two-month high Friday after plunging 28 percent in 2013, some experts say the precious metal is ripe for a major short squeeze.

"In a heavily shorted market, you'll get to a level where people can no longer stand the pain, and then everybody rushes to the exit at once, causing the move to feed off of itself," Jim Iuorio of TJM Institutional Services told CNBC.

In the wake of last year's move, "there are a significant amount of people out there who really believe the gold price should be much lower, and you have a record amount of shorts in the market" Mihir Dange, a gold options trader with Grafite Capital, told CNBC.

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"But usually record shorts and a rally should lead to some sort of squeeze somewhere."

February gold futures settled at $1,264.30 Friday with the spot price reaching a high of $1,272.70.

MacNeil Curry, head of global technical strategy of Bank of America Merrill Lynch, believes a definitive rise through $1,270 could touch off a rally. A move through there could push gold all the way to $1,399, he told CNBC.

To be sure, some experts are skeptical of gold's rally, especially after SPDR Gold Shares, the world's largest gold-backed exchange-traded fund (ETF), reported a 5.4 metric ton gold outflow Thursday, Reuters reported.

"It is questionable whether the price rise will be sustainable given that 6 tons were withdrawn from the gold ETFs [Thursday]," Eugen Weinberg, head of commodity research at Commerzbank, told Reuters

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