Gold expected to move between $1,350 and $1,425

Gold for February delivery rose $31.90, or 2.33 per cent, last week to close at $1,406.20 an ounce at the Comex division of the New York Mercantile Exchange. The metal traded as high as $1,417 and as low as $1,352 during the week ended December 3. Gold prices reached for new highs on Friday on the back of a disappointing November US unemployment report.

Gold might peak between $1,600 and $1,615 an ounce in 2011 and average above $1,400 for the entire year, Philip Klapwijk, chairman of GFMS; a London-based research company, said in Shanghai.

The metal is expected to move in a wider range of $1,350 to $1,425 next week as traders may choose to allocate assets on dollar weakness. Gold analysts, however, pointed out that price swings on Friday could be deceiving as traders must even out positions, cover shorts, and so volume could be light.

“Ongoing economic uncertainty and the possibility of more quantitative easing needed to counter high unemployment and stagnation are solid grounds for gold investment,” said Bayram Dincer, an analyst at LGT Capital Management in Pfaeffikon, Switzerland.

Going ahead, futures and options (F&O) participants expect February futures to face strong resistance above $1,429.50. Volume-based support for the metal is seen around $1,355 next week. The weekly market picture chart is hinting at a time-price opportunities (TPO)-based target of around $1,430. Traders bought gold below $1,380 and booked profit above $1,410

The initial balance range ($1385-1389), the first two TPO time periods established by liquidity providers, saw only 5.6 per cent volume and 14 per cent price range, which is hinting at a very limited downside from the current level. Options traders bought the 1,400-strike call options of February delivery at a premium of $41 and sold the $1,425-strike call options at a premium of $31.

Bollinger Bands (B-Bands) is hinting at resistance at $1,426 and lower-end support at $1,352. On the Multi Commodity Exchange (MCX), gold futures for February delivery closed at Rs 20,560 per 10 grams. The market picture chart suggests a TPO-based upside of Rs 20,850.

Hedge-fund managers and other large speculators increased their net-long positions in New York gold futures in the week ended November 30, according to US Commodity Futures Trading Commission data. Speculative net-long positions rose by 6,278 contracts, or three per cent.