Gold futures for December delivery fell $8.90, or 0.5 per cent, to close at $1,742.60 on the Comex in New York on Friday. This week, the metal jumped 5.5 per cent, the most since February 2009 and the sixth straight gain. CME Group Inc, owner of the world’s largest futures market, raised margins on gold contracts by 22 per cent on Friday. The December futures saw volume-based selling after reaching an all-time high of $1,817.60 an ounce. The market picture chart hinted at an upside resistance above $1,760-1,791 and volume-based sell-off around $1,701, which is also 50 per cent Fibonacci retracement from the recent high from a low of $1,580.
“Gold is currently overheated after a very sharp rally and hence it is vulnerable to profit-taking,” said Sterling Smith, commodity trading adviser with Country Hedging. For the next week, gold’s direction will be dependent “entirely” on how the equities trade, Smith said. He wouldn’t be surprised if gold trades down to $1,650. Jimmy Tintle, analyst at Transworld Futures, noted there is a gap of around $1,650 on technical charts, which is why some traders believe gold could pull back to that level. Brian LaRose, technical analyst at United-ICAP, expects gold to get support between $1,710 and $1,735. Critical support is at $1,550 and if gold prices break through at that level, then gold prices may peak.