By Barani Krishnan
Investing.com - Down 1% Friday to neatly reverse the previous session’s gain, gold has become a classic “yo-yo” trade as longs and shorts square off to determine the next direction for the yellow metal after this week’s worst carnage in seven years.
Gold fell nearly 3.5% on the week, the first weekly decline in 10 and the biggest setback since early May, when safe-havens and risk assets plunged together during a liquidity crunch at the height of the coronavirus scare in the United States.
Tuesday’s biggest one-day sell-off in gold since 2013 wiped 5%, or $93, off the December contract, which is the most-active on New York’s Comex, after a greater intraday swing of $129. Since then, trading in the yellow metal has turned into a game of pure nerves or, at best, high-powered chess.
December gold settled Friday’s trade down $20.60 at $1,949.80 per ounce after hitting an intraday low of $1,940.10. Just a week ago, it hit $2,089, the highest ever for any gold futures contract on Comex, before the avalanche triggered.
“The curious case with gold is what, when and how much surprise it comes with,” said Sunil Kumar Dixit, an independent precious metals chartist. “For now, there’s no longer one-sided momentum. Volatility is on either side.”
Dixit said the “upper flanks” of gold showed a market that could go from $1990 to $2,007 and $2,015, while “lower linings” could bring a range from $1,920 to $1,900, $1,888 and $1,860.
“A range break on either side can add momentum of $40 to $100 more,” he added.
His best bullish case for gold is a ramp up to between $2,015-$2,029.
“I don't see the bulls succeeding above $2,029 to $2,039 as this will be a point of huge breakdown,” Dixit said.