The April gold futures on the Comex division of the New York Mercantile Exchange settled on Friday at $1,421.80 an ounce, down $6.80 from the previous week. Gold’s performance next week will depend on how the political unrest in West Asia plays out and whether any events trigger a worsening of the European debt crisis. If these situations worsen, gold may cross the $1,450 level. The precious metal could instead dip below the $1,400 area if the West Asian violence abates.
Earlier, the April futures retreated sharply from a Monday peak of $1,445.70 an ounce to a low on Thursday of $1,403, before holding its ground to close at $1,421.80. The decline on Thursday was attributed to dollar strength and disappointing Chinese trade data, which prompted longs to book profits on their previous gains. Sterling Smith, market analyst and commodity trading advisor with Country Hedging, said he was more optimistic about gold’s prospects next week.
Gold is likely to move in a tight range next week, suggest the trading pattern in the April futures and the open interest build-up at call and put options. Technically, prices are expected to face resistance at $1,445.70 and support below $1,400. Friday’s MKTP chart for April futures hints at a strong resistance above $1,435 and support around $1,396. Gold may not go substantially below $1,403 next week.
Call buyers expect gold to remain subdued and range bound. Sell-side trade was seen in the 1,415-1,430 strike call options, the trade summary matrix for the week-ended March 11 suggests. Traders also sold long positions in the 1,450 strike call options. There was put-buying at $1,400 and at 1,415 strike put options as participants expect gold to fall below 1,400 in the near future.
Hedge-fund managers and other large speculators decreased their net-long position in New York gold futures in the week ended March 8, according to US Commodity Futures Trading Commission data. Net-long positions fell by 6,313 contracts, or 3 per cent, from a week earlier. Miners, producers, jewellers and other commercial users were net-short 247,464 contracts, down 3,132 contracts, or 1 per cent, from the previous week.