Gold for December delivery dropped to $1,315.60 before recovering to $1.325.10 an ounce by Friday’s close on the Comex division of the New York Mercantile Exchange. This was probably due to the G-20 proposals from the US, indicating a possible attempt at calming currency markets, according to Julian D W Phillips of Gold-Authentic Money.
Gold futures fell, capping the biggest weekly slide since early July, as the dollar rebounded, eroding demand for the precious metal as an alternative investment. The dollar gained last week, snapping a five-week slump against a basket of six currencies. Gold has dropped 4.5 per cent since reaching a record $1,388.10 an ounce on October 14.
A long-awaited technical correction in gold was expected as it was scaling new highs every week for the last five weeks despite an overbought status. The 14-day relative strength index (RSI) of Gold futures for December delivery soared to above 81 some time back and remained above 75 in October. A high RSI, say above 70, suggests an overbought or weakening bull market.
Going ahead, gold may fluctuate in a narrow range until the US Federal Reserve’s policy makers meet in two weeks to decide whether to increase stimulus measures to spur US growth. “Gold prices could still rally if insufficient quantitative easing-2 (QE2) measures simply introduced new downside risks to US growth,” analysts at Deutsche Bank said in a report. Gold is not in a “bubble” until prices top $2,000, the analysts added.
The market picture for last week’s five trading sessions hinges at a price level of $1,307.50 for the gold December futures, based on time-price opportunities (TPOs). The volume-based resistance is expected to come around $1,311.50. On Friday’s market picture chart, gold is expected to move up to around $1,330 with TPO-based resistance at $1,338.50.
The 21-day moving average data indicates resistance for gold at $1,383 and strong support at $1,315. On the Multi Commodity Exchange, gold futures for December delivery is expected to move up to around Rs 19,500 per 10 grams with strong volume-based support at Rs 19,150.
Hedge-fund managers and other large speculators decreased their net-long position in New York gold futures in the week ended October 19, according to US Commodity Futures Trading Commission data. Net-long positions fell by 6,122 contracts, or two per cent, from a week earlier.
