August gold futures on the Comex division of the New York Mercantile Exchange settled at $1,500.90 an ounce on Friday, down 2.48 per cent on the week. Gold fell sharply in the last two trading sessions on significant selling pressure from the other time-frame traders. The lack of support from floor traders triggered the biggest two-day drop in seven weeks from $1,545 to $1,498 before settling at $1,502.80. The dollar headed for the third straight weekly advance against the euro, eclipsing gold as an alternative investment.
“Gold is losing the flight-to-quality bid in the near-term as the leaders are working towards overcoming the Greek debt,” said Adam Klopfenstein, a senior strategist at Lind-Waldock, a broker in Chicago. The metal closed below its 50-day moving average of $1,511 for the first time since February. The market participants predict price changes on the downside next week and hence they booked profit in the August futures on Thursday and Friday.
The market-wide sell-off could find momentum into the next week, especially if traders need to raise cash by selling profitable positions like those in gold. The significant selling in August futures was seen at $1,522-$1,525, the area of the point of control. The futures also witnessed price-based selling above $1,513 from other time-frame traders. The market picture chart hints price level of $1,463 and a resistance above $1,513 the next week.
Options traders were sellers in $1,500 strike call and bought same strike put options expecting fresh decline next week. The market should find support at $1,475, and any fall below this level is very bearish. Last week, the heavy downside pressure on gold was evident at the time the IEA said it will release stocks to compensate Libya’s supply that triggered a strong sell-off on crude, pressuring gold down with it.
The downside pressures on gold might still be evident next week as the metal broke through critical support levels last week. Some upside support might still be seen from the debt crisis as investors will keep their focus on the parliament vote in Greece on the austerity package. If the measures pass, the dollar might weaken and a wave of optimism might be seen that will offset the pressure on gold.