Gold prices are set to stabilize in the wake of Asian demand
Its been a full year and a half since the collapse in the gold prices has started, the precious metal has been in a bear market ever since. We are looking at potential opportunities in the coming days to trade the precious metal on the upside or the downside.
According to our analysis current prices on Gold are providing a great opportunity to buy daily calls on the precious metal. Once again after we reach 1250, Asian demand kicks in and the price of Gold has a hard time to go further lower. As the FED hasn't taken steps to raise interest rates, so does the Gold stay at lower levels.
Many traders are using gold prices as a barometer of risk sentiment, however in the past quarters this indicator hasn't worked very well. Current prices around $1249.50 are in our view a very good level to play the end of Thursday expiry for a close above $1250. While there is no certain determination for now, we are willing to risk it.
The critical level in the price of gold to the downside is the $1241 June 2014 low. If this level gives way, we could see a rather swift drop towards the bottom end of the yearly range to test lows around $1180. Commerzbank is saying that the main factor which is affecting prices of gold os the strong US dollar.
We are seeing geopolitical pressures being reduced lately, but there is a big difference in the behavior of the price of gold. Once we reach 1241 for yet another test we would be buying daily calls, until then current levels are valid for a play on the call side for Thursday.
On the downside, if we see an hourly close below $1244, we could be set for another run lower, which would trigger a daily put trade. Until then we remain very cautiously biased to buy daily calls. This picture could change any day now.