Strong resistance for gold above $1,350

The gold for December delivery set an all-time intraday high of $1,366 on Thursday, but closed considerably lower at $1,345.30 a troy ounce just a day later 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 a level of $1,343.50 for the week.

Now, the weekly market picture chart sourced from Bloomberg hints at a price level of $1,383.50 for the coming weeks. The market picture for the gold December futures suggests a narrow-band movement with TPO support at $1,317.70. Volume-based resistance is expected to come around $1358.50.

The trading pattern in call options for December series hints at sell trades in the $1,350-strike calls at a premium of $21. Traders bought the $1,350-strike call options and sold $1,330-strike calls of November delivery at a premium of $21 a contract on expectation of resistance above $1,350.

The 21-day moving average (-DMA) data indicates resistance for gold at $1,366 and strong support at $1,313.30. The 21-day relative strength index (-RSI) has come down to 77.03 from 81.17 last week. Nevertheless, an overbought position in gold futures continues. On the Multi Commodity Exchange, gold futures for December delivery is expected to move up to around Rs 19,905 per 10 grams with strong TPO-based support expected at Rs 19,265.

Gold futures for December delivery closed at $1,345.30 an ounce on Friday on the Comex in New York, posting a weekly gain of $27.50, or 2.1 per cent, on a long build-up above $1,310. Trading data sourced from Bloomberg for the week ended October 1 shows strong selling pressure above $1,350 with 13 per cent volume above $1,350. Below $1,323, there was no selling pressure as only 16 per cent volume and seven per cent TPOs were seen.

The uptrend in gold continues because the dollar just continues to lose ground,” said Matthew Zeman, a metal trader at LaSalle Futures Group in Chicago. “There’s more downside in the dollar. The jobs number just reinforces the fact that we’ll see more quantitative easing.”