Gold recovered sharply by $38.8 to an intra-day high of $1,348.80 on Friday, after hovering near the 150-day moving average as market participants viewed riots in Egypt with some apprehension and bought gold as a safe-haven bid.
The selling pressure eased around $1,309 and was enough to erase most losses the metal suffered last week. April gold futures on the Comex division of the New York Mercantile Exchange settled at $1,341.70 an ounce, unchanged on the week. Technical analysts now suggest prices could begin to bottom out.
How much follow-through support the action in Egypt will give precious metals depends on how the situation develops over the weekend. Ralph Preston, senior financial analyst at Heritage West Futures, is a bit sceptical on the staying power, especially as the riots haven’t hit more politically sensitive countries like Iran and Saudi Arabia. Technical analysts expect gold to get support at $1,312 and likely face resistance around $1,364.
The 150-day moving average is currently about $1,306. Friday’s bounce was a sign that prices were poised to rally, said David Hightower, president of a Chicago- based research firm. The metal might climb to $1,630 by June-end, he said. Prices rebounded from the 150-day moving average three other times in the past year, data compiled by Bloomberg show. The last time gold traded near the average was in late July. Since August 1, prices have advanced 13 per cent. The metal has not fallen below the 150-day average since January 2009.
Gold is likely to move up to $1,364.50 and get time price opportunities-based support at $1,290. Bloomberg’s market picture chart suggests a price level of $1,312-1,336, based on buying support seen in the value area from participants. The call writers expect gold to face resistance above $1,350 as they build up significant short positions at that level. The 21-day moving average indicates an upside of $1,422 and support at $1,312.
The weekly trading volume in April futures is hinting at a volume-based downside around $1,290. The TPO-based resistance is expected to come around $1,362.50, the MKTP chart suggests.