Gold poised to hit record high at $1,582 an ounce

(July 10, 2011 - by B G Shirsat / Business Standard)

The gold outlook for next week is moderately bullish. Analysts say the next key upside chart resistance is the swing high from June 22 at $1,559.30. If the market broke through that ceiling, it would target a retest of the $1,577.70 high. On the downside, initial support lies at $1,522.20. Gold prices rallied on Friday, as the August Comex contract hit its highest level since June 23, after a sharply weaker-than-expected US June employment report. August futures settled at $1,541.60 an ounce, up four per cent for the week.

Bloomberg data suggest significant volume-based short covering in August futures on Friday, above the $1,532-mark. The 35 per cent TPO counts above the points of control (PoC-1,532) indicate net buying day and a paltry six per cent volume in the initial balance (IB) range hints at the presence of other time-frame traders. The market saw buying range extension as the August futures moved above the IB (1,531-1,533), with over 50 per cent volume changing hands above that level.

The buying extension occurred above Thursday’s value area and gave a strong buy signal. The August futures are expected to move up afresh next week, with a volume-based target of 1,559.25, the MKTP data suggests. On the weekly chart, gold is poised to hit a new high at $1,582 and lower-end support is seen at $1,517. On the Multi Commodity Exchange, the August futures are expected to move up around 22,160 and get lower-end support at 22,160.

The options traders expect price level above $1,550-1,560 as same strike call options saw significant short-covering at an average premium of $18-13 a share. The put writing was seen at $1,540-1,550-strike put options, indicating gold may open on a strong note on Monday.

In the weekly Kitco News Gold Survey, 16 of the 23 participants see prices go up, while four see them move down and three see them sideways or unchanged. Market participants include bullion dealers, investment banks, futures traders and technical chart analysts.

George Gero, vice president with RBC Capital Markets Global Futures, pointed to Friday’s June jobs data and said, “The unemployment report could be a game changer as many people were looking for higher rates next year. This could nix the outlook for higher rates.” That, in turn, is bullish for gold, as the low US rate environment has been a factor supporting the yellow metal in recent years.

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