For the past six weeks gold has traded within a tightening range which has increasingly focused around the $1300 level. While the recent consolidation could easily resolve in either direction, there are 3 good reasons for gold bulls to be concerned about a downside move over the coming weeks:

1. Commitment of Traders (COT) data has shown a large bullish position accumulated by speculators in recent weeks while commercials have taken the opportunity to raise their short bets:

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Gold_COT_5.12.2014

While the COT data is far from an excellent market timing tool, one cannot ignore a large increase in speculative bets while price remains relatively unchanged.

2. Seasonality is not favorable for gold during May & June (gold bulls will be happy to forget last year’s dreadful June…..):

Gold_Seasonality

3. Gold has remained mired in a descending triangle for weeks even as the Ukraine/Russia tensions continue to heat up:

Gold_Daily_5.12.2014

Such price action is indicative of large holders using strength to reduce long positions even as smaller speculators continue to pile into bullish positions.

The battle lines are clearly drawn in gold as the summer begins: Strong support exists near $1275 while it would take a decisive breakout above $1330 to turn the tables back clearly in the bulls favor.