Gold futures for August delivery ended lower on Friday after stress tests showed that seven European banks were not strong enough to withstand another recession. The test showed that banks in Germany and Greece were weak spots and needed restructuring. Gold for August delivery settled $7.80 lower at $1,187.80 an ounce at the Comex division of the New York Mercantile Exchange. The gold traded as high as $1,203.90 and as low as $1,183.40 before closing at $1187.80.
Friday’s time-price opportunity charts based on Bloomberg data suggest that gold may move up around $1,207.50 an ounce in the near future, with volume-based support around $1,177.50. The technical resistance for August futures is expected at $121030 and support at $1175.10. On the Multi Commodity Exchange, gold August futures are expected to move in a narrow band next week with weekly support at Rs 18,090 and strong resistance at Rs 18,450.
The past few weeks have seen a downturn in speculative interest and reduced physical buying. This has caused prices to slump to a two-month low of $1,175 an ounce, some six per cent lower than the lifetime high and a far cry from the $1,400 price tag cited just a couple of months ago. While investors were happy to engage in bargain hunting during a dip, the market failed to ignite aggressive buying or show staying power.
Meanwhile, the world’s largest gold-backed exchange traded fund, SPDR Gold Trust, reported a drop in holdings for the second week, after soaring to a record of 1,320.436 tonnes at the close of June. Hedge fund managers and other large speculators decreased their net-long position in New York gold futures in the week ended July 20, according to US Commodity Futures Trading Commission data.
Speculative net-long positions fell by 26,614 contracts, or 13 per cent, from a week earlier. Miners, producers, jewelers and other commercial users were net-short 215,664 contracts, down 32,684 contracts, or 13 per cent, from the previous week. Each Friday, CFTC publishes aggregate numbers for long and short positions for speculators such as hedge funds and institutional investors, as well as commercial companies that buy or sell futures to protect themselves against price moves.