Gold may fall to around $1,169

Gold futures for August delivery fell $21.60, or 1.81 per cent, last week, to $1,188.20 on the Comex in New York, the biggest drop for a most-active contract since July 1. The settlement below $1,190 brought gold to the bottom of its recent trading range. The price projection using time-price opportunity (TPO) indicates that gold can fall around $1,169 in a day or two.

The gold futures for August delivery saw strong sell volume at the $1,990-strike call options, Bloomberg data indicated. The participants wrote call options at $1,990 and above on expectation of a fresh downside. Traders also bought the $1,990 put options and covered short positions at the $1,180 put options. Traders said there was heavy selling of gold call options by a fund manager in early trade. A fresh outflow from the world’s largest gold ETF (exchange-traded fund) had undermined appetite for the precious metal, analysts said. Gold rose to a record $1,266.50 an ounce on June 21 and surged to all-time highs in euro, pound and Swiss franc terms last month amid Europe’s fiscal crisis.

Hedge fund managers and other large speculators decreased their net-long position in New York gold futures in the week ended July 13, according to US Commodity Futures Trading Commission data. Speculative long positions outnumbered short positions by 204,921 contracts on the Comex division of the New York Mercantile Exchange, the Washington-based commission said in its Commitments of Traders report. Net-long positions fell by 4,121 contracts, or 2 per cent, from a week earlier.

Miners, producers, jewellers and other commercial users were net-short 248,348 contracts, down 794 contracts from the previous week. According to Bloomberg, assets in the SPDR Gold Trust, the biggest ETF backed by bullion, declined 0.61 metric tonnes to 1314.21 tonnes. Global holding of gold by ETFs fell 0.7 tonnes from a record 2075.42 tonnes.

Gold historically has moved in tandem with the euro as an alternative to the US dollar. This year, as Europe’s sovereign-debt woes unfolded, investors sold euros and bought gold and US dollars as stores of value.

“The story of Spain, Portugal and Greece is now calming down and people are taking their chips off the table. So, we are seeing gold under pressure,” said Jeremy East, global head of commodity derivatives trading at Standard Chartered.