During the last trading session on Friday, gold price fell over 1 percent to a one-month low. This biggest daily drop in more than three months was caused by technical selling and tumbling equities on economic uncertainty around the world.
Gold ended 2% down on the week, with the most-active December contract on the Comex division of the Nymex settling at $1,724 an ounce.
It appears, the bullion found support at its 50-day moving average after it briefly broke below that key technical support. By now, it has erased all of its posted gains, since early September when the U.S. Federal Reserve launched a third round of bond-buying known as quantitative easing to stimulate economic growth.
People who rushed in the market with the expectations that quantitative easing will prompt a significant lift, now are getting out of the market. The longer gold does not make a new high, the more traders are getting nervous about the market direction.
So far this year, gold has failed to trade above $1,800 an ounce. Some traders expect profit-taking to pressure gold prices further, after hedge funds and money managers raised their gold futures positions to their most bullish in nearly 14 months last week, according to the US Commodity Futures Trading Commission (CFTC) Commitment of Traders report.
In addition to questions about future U.S. quantitative easing expectations, several industry analysts commented that with three weeks to go before the U.S. presidential election, there is a bit of hesitancy to determine positions.
Elsewhere, German Chancellor Angela Merkel raised new hurdles to using the euro zone’s rescue fund to battle the region’s debt crisis. Gold’s trading well below its record high during European debt worries suggests the metal could see further weakness.
Last Friday’s close under $1,729 made it the lowest close in a month suggesting that gold may be testing how strong of support there is at $1,700.
Going into next week, traders will be watching the $1,720 area for December Comex gold, which near the 50-day moving average. If at that level the yellow metal fails to hold, the next support is at $1,700. Further than that, gold can possibly slide to the $1,668 area, which is the 200-day moving average.
At least for the beginning of the week, it looks like gold will continue to fall. Few events further in the week may influence the yellow metal’s price. Regional elections in Spain may influence the country’s does in terms of asking a bailout. Results of the Chinese PMI are set for release on Tuesday, and European Central Bank President Mario Draghi’s speech to the German parliament is scheduled on Wednesday. The outcome of these event could pressure gold prices further.
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