Gold futures crossed $1200 to close at $1207.50 an ounce on the Comex division of the New York Mercantile Exchange as weak US employment data heavily weighed on the dollar.
The most active gold contract for December delivery is expected to move around $1225.50 based on price projection using the trading volume on August 6. The weekly market picture chart indicates a price target $1,217, based on time-price opportunity and volume. The December futures are expected to get support at $1182.50.
Traders sold the $1,210-strike call options of the September series on Friday at a $15 premium on expectation of strong resistance above $1,225. However, the $1220-strike call witnessed buy trades at a $9.20 premium, mostly to hedge short positions. Gold is expected to get a big direction trend next week after the Federal Reserve’s Federal Open Market Committee meeting, where short-term interest rates are set. If the Fed goes with another round of quantitative easing, the dollar will be under pressure, which could give gold a boost.
Citigroup analysts said on Friday that gold was likely to stay in a $100 range between $1,150 and $1,250 in the near term under the current conditions. “The VIX index and the Greek default-swap spreads have fallen since June and gold along with them. Risks to the global financial system are easing somewhat but remain a threat in the wings,” they said in a research note. The weak dollar continued to enhance gold’s appeal as an alternative investment and encouraged investors to re-enter the gold markets.
Gold surged above $1,200 an ounce on Friday, benefiting from the decline of the dollar as well as investors’ renewed worries over the pace of the US economic recovery. The price once hit 1,213.3 dollars per ounce, which is the highest level for a most-active contract since July 15. Gold has extended the longest rally since November in the last eight sessions, and gained 1.8 per cent last week. The close put the market in a position to test a major 50 per cent price level at $1215.00. This price represents a retracement of the $1270.60 to $1159.30 in the June to July sell-off.
Hedge fund managers and other large speculators decreased their net-long positions in New York gold futures in the week ended August 3, according to US Commodity Futures Trading Commission data.