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A Sticky Situation for Gold Bears

This article was originally published on ETFTrends.com.

As gold and the related exchange traded products struggled for much of the first nine months of 2018, eager short sellers piled in, establishing extreme levels of bearish positioning in the yellow metal.

However, the SPDR Gold Shares (NYSEArca: GLD) , the world's largest physically-backed gold ETF, is up more than 3% over the past week, a rally that is seen chasing some gold bears.

“Last week, the fund broke out above recent congestion in the $114.50-$115 region, and is now trading north of $115, a region that roughly coincides with GLD's 80-day moving average and a 23.6% Fibonacci retracement of its plunge from April highs near $129.50 to August lows around $111,” according to Schaeffer's Investment Research.

September market the sixth consecutive month of losses for gold and some technical analysts believe the yellow metal needs to steady above the $1,200 to $1,210 per ounce area to encourage short covering, which stoke a swift rally.

Related: Top 34 Gold ETFs

A Look At Gold Miners, Too

Gold miners and the corresponding ETFs are participating in bullion's recent bounce. Over the past week, the VanEck Vectors Gold Miners ETF (GDX) , the largest exchange traded fund dedicated to gold mining stocks, is up more than 7%.

GDX “also moved above their 80-day moving average -- last seen up 1.7% at $20.08, bringing their month-to-date gain to 8.4%. The fund is now testing the round $20 mark, home to its mid-August bear gap,” according to Schaeffer's.

Related: Geopolitical Concerns Could Bolster Gold’s Rally

GDX is comprised of global gold miners, with a notable tilt toward Canadian and U.S. mining companies. Stock fundamentals like cost deflation across the mining industry, share valuations below long-term average and rising M&A are all supportive of the miners space as well, but those fundamentals could be glossed over if the dollar strengthens.

“One options trader today doesn't seem to worried about this potential layer of resistance. Amid accelerated call volume -- the 115,000 contracts traded is twice the expected intraday amount -- a bullish bettor appears to be selling to close October 20 calls and rolling them up and out to the weekly 10/26 21-strike, expecting GDX to break out above $21 by the close next Friday, Oct. 26,” reports Schaeffer's.

For more information on the gold market, visit our gold category.

Tom Lydon’s clients own shares of GLD.