Gold futures: Set for $1,343.50 next week

The gold for December delivery set an all-time intraday high of $1,322 on Friday, before finally setting at $1,317.80 a troy ounce on the Comex division of the New York Mercantile Exchange. We had indicated in this column last Sunday that a market picture chart with time-price opportunity (TPO) and volume data points at the $1,315-1,319.50 level for the week.

The market picture for the gold December futures suggests new levels with both TPO and volume price target of $1,343.50. The trading pattern in call options for December series hints at buy trades in the $1,325-1,350-strike calls at a premium of $31.25 for $1,325-strike calls and $21 for 1,350-strike calls. This shows strong undercurrents with a price target of $1,380 before expiry of the December series.

Participants sold the $1,300-strike put when gold moved convincingly above $1,310. The build-up of open interest (OI) in puts indicates that gold may not fall below $1,300. The 21-day moving average data indicates resistance for gold at $1,350 and strong support at $1,310. The 21-day relative strength index (RSI) was at 81.17 last week — a signal for overbought positions.

On the Multi Commodity Exchange, gold futures for December delivery is expected to move up around Rs 19,545 per 10 grams with strong TPO-based support at Rs 19,108.

Gold futures for December delivery closed at $1,317.80 an ounce on Friday on the Comex in New York, posting a weekly gain of $19.50, or 1.50 per cent, on short-covering and long build-up above $1,310. Trading data sourced from Bloomberg for the week ended October 1 shows strong buying interest with 69 per cent volume changing hands above $1,310. There was no selling pressure, as only 16 per cent volume and 14 per cent TPOs were seen below $1,296.

According to Bloomberg, gold futures reached $1,322 an ounce – the highest price ever – as the dollar headed for a drop for the third week in a row against the euro on speculation that the US Federal Reserve will ease monetary policy further to stimulate the US economy.

“Gold is continuing to propel itself higher on the weakness of the dollar,” said Adam Klopfenstein, a senior market strategist at Lind-Waldock in Chicago. “The US Fed now wants to see inflation, and they’re going to step in and prop up the bond market. If you’re a coupon clipper in the bond market, you’re going to want to go with assets with higher returns, like gold.”