The gold is caught in the broader $1,180 to $1,230 range but still needs a major advance to the upside to begin to undo the three-week-long damage on the charts.
Technical support and resistance remains at $1180-1230 and an either-side breakout is possible only if gold breaches these levels. The relative strength index (RSI) at 45.84 indicates range-bound movement, but historical evidence suggests the gold has advanced to the upside whenever RSI has touched the low of 40.
Last week, RSI fell to 40 and gold August futures rose from a low of $1194 to $1,209.80 an ounce on Friday at the Comex division of the New York Mercantile Exchange. Bets on a gold rally by hedge-fund managers and other large speculators also dropped the most since April 2009 after the metal traded below a key moving average following the euro’s rebound. The August futures of gold moved in a tight range after touching the intra-day low and advanced on Friday to registered marginal gains.
The market picture data from Bloomberg indicate that gold may get support at $1,183 based on time-price opportunity (TPO), with volume-based supply at $1,223. Options traders bought the $1,200-put, mostly to hedge long positions around the same level. Traders sold the $1,230-strike call as they expected that gold might not move above this level. This means gold is expected to move in the range of $1183-1,223 next week. On the Multi-Commodity Exchange, gold August futures were expected to move down around Rs 18,195 and make an intra-day top at 18,525, TPO data suggested.
Commodity Futures Trading Commission data for the week ended July 6 showed speculative long positions outnumbered short positions by 209,042 contracts on the Comex in New York. Net-long positions fell by 35,683 futures contracts, or 15 per cent, from a week earlier. Gold prices fell 3.8 per cent between June 29 and July 6 and traded below the 50-day moving average in the three sessions ended July 6.
“It’s not surprising to see a big dent in net longs after the technical damage was done,” said Matt Zeman, a trader at LaSalle Futures Group in Chicago. “A lot of traders use the 50-day moving average. If it breaks under, you’re out.” Net-longs rose to a record 262,331 contracts in November. Gold futures climbed to an all-time high of $1,266.50 on June 21.
