Gold may not rise above $1,381 in near future

The rally in gold remained short-lived as the global recovery slowly gathered pace. The gold futures for April delivery fell to a low of 1,323.60 from a high of $1,361 and recovered thereafter to close at $1,349.10 an ounce on Friday. The weekly gains were modest at 0.55 per cent.

The dollar gained against the euro last week after a Labor Department report showed the US jobless rate in January unexpectedly fell to nine per cent, the lowest in 21 months. Prior to this, gold reached a two-week high of $1,361 an ounce as the mounting conflict in West Asia boosted demand for the metal as a safe-haven investment.

An improving labour market “would present a downside risk for metal prices” on the prospect that the Federal Reserve would tighten monetary policy, Tom Pawlicki, an analyst at MF Global Holdings Ltd in Chicago, said in a report. Gold futures for April delivery fell $4, or 0.3 per cent, on Friday, to settle at $1,349.10 an ounce on the Comex in New York.

Gold is likely to face strong resistance at $1,381 and get time price opportunities-based support below $1,230. Bloomberg’s market picture chart suggests a price level of $1,330-1,347 based on buying support seen in the value area from participants. Call writers expect gold to face resistance above $1,350 as they built significant short positions at that level. There was put buying at the $1,380-strike and hence gold may not go above this level in the near future.

From the technical perspective, on the weekly chart, gold remains capped by 20-day simple moving average of $1,352, while MACD (moving average conversion diversion), which crossed over to the downside earlier this year, is yet to reverse course.

Going forward, the next key level of support will be $1,300, which coincides with the 38.2 per cent Fibonacci retracement on the February 2010 low to the December 2010 high.

Hedge-fund managers and other large speculators decreased their net-long positions in New York gold futures in the week ended February 1, according to US Commodity Futures Trading Commission data. Net-long positions fell by 9,395 contracts, or six per cent, from a week ago. Miners, producers, jewellers and other commercial users were net-short 193,197 contracts, down 4,286 contracts, or two per cent, from the previous week.