Gold climbed to a record level last week as investors stepped up demand for a haven from financial turmoil. The December futures closed at $1,277.50 on the Comex in New York, posting the biggest ever weekly gain of $26.60 an ounce, or 2.13 per cent. Going ahead, gold is expected to trade with a negative bias, as indicated by the profit-booking seen at higher levels on Friday.
According to data on the basis of time-price opportunities (TPOs), the areas where volume and price traders prefer to trade, a softening of gold prices can be expected around $1,271.25 next week. On a weekly chart, the yellow metal is expected to rise further to a new high of $1,296.50 — a price projection using TPOs. A volume-based surge is likely to take gold’s December futures to around $1,298.50.
We had indicated in our gold outlook column last week that the yellow metal may not go below $1,242 an ounce and was likely to hit a record high of $1,275.75. Gold futures for December delivery rose sharply from a low of $1,242.19 on Monday (September 13), to an all-time high of $1,284.40 on Friday on short-covering at higher levels.
Technically, gold futures are expected to face strong resistance at $1,300 and strong support at $1,250. Call options traders built up long positions in the $1,280-1,300-strike calls in the first four trading sessions and booked profits on Friday due to fears of a fresh correction. However, the short positions got built up in the $1,270-1,280-strike puts, indicating support at these levels.
Hedge-fund managers and other large speculators increased their net-long position in New York gold futures in the week ended September 14, according to US Commodity Futures Trading Commission data. Speculative long positions outnumbered short positions by 244,261 contracts on the Comex division of the New York Mercantile Exchange, the Washington-based commission said in its Commitments of Traders report.
This year, gold has gained 17 per cent, and silver has jumped 24 per cent, outperforming stocks, bonds and many commodities as sovereign-debt concerns and an uneven economic recovery roil financial markets. Gold is going to be the asset of choice said Adam Klopfenstein, a senior market strategist at Lind-Waldock in Chicago.
According to a Bloomberg report, the recent strength in gold prices has largely been driven by a combination of short covering by miners and investor demand through the use of exchange-traded funds. The past two weeks saw strong inflows into equity ETFs. In contrast, flows into non-exchange traded mutual funds remain negative, indicating that it is hedge funds rather than retail investors behind the equity buying.