Gold futures for April delivery broke through the key $1,390 mark to a high of $1392.5, the highest since January 13, on Friday afternoon on rising civil unrest across North Africa and West Asia and a softening dollar. The futures closed at $1389.4 an ounce, up $29 over the week-ago level of $1,360.4. The metal climbed two per cent in the week.
Gold is likely to face strong resistance at $1,404 and get support below $1,264, the market picture chart suggests. Technically, a gold price at $1,404 is also a 76.4 per cent retracement of the fall from a high of $1,434.10 to a low of $1,309.10. The MKTP chart for the Friday for April futures hints at range-bound trading with strong resistance above $1,396 and support at $1,364.
Call writers expect gold to climb above $1,400 as they built significant long positions at that level in the last three trading sessions. There was put writing at the $1,380-strike as participants expect gold to stay above this level in the near future. From the technical perspective, on the weekly chart, gold remains capped at $1,394.70, while support is seen at $1,354.40.
The strengthening of gold prices is also seen from an increase in net long positions by hedge-fund managers and other large speculators in New York gold futures in the week ended February 15. Net-long positions rose by 5,751 contracts, or 3 per cent, from a week earlier.
Each Friday the 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 against price moves.
Gold would appear to have room for much more gains regardless of further Chinese monetary tightening, states HSBC. The yellow metal initially dipped on Friday following China announcing a 50-basis-point hike in the reserve ratio for banking institutions, the eighth hike of the phase. Even so, gold finished higher on Friday.
“The gold market is unlikely to cool significantly in response to further Chinese tightening until that tightening is seen to be effective, we believe,” HSBC claims. “This leaves further room on the upside, as Chinese bullion demand remains strong.”
