Fear in the market place continues to weigh on investor sentiment but riskier assets have bounced back over the past couple of week putting pressure on the dollar and generating lack of demand for gold. Gold in-fact has not been able to bounce significant after falling dramatically in early September.
In addition to the rally in riskier commodities, such as the Euro, Sterling and the Aussie, the US CFTC is also pressuring the yellow metal with new regulations. The Commodity Futures Trading Commission on Tuesday approved a rule designed to curb bets on oil, gold, sugar and other commodities.
The new regulations aims to cap the positions firms can take in certain commodity contracts in order to curb volatility. The rule gained traction in Congress during an oil-price spike in 2008. Limits on contracts for near-term delivery, as opposed to deferred contracts, will restrict owning more than 25% of a commodity’s estimated deliverable supply.
The CFTC also reported that funds (as opposed to commercials) added to their Comex gold futures and options holdings in the week ended Oct. 11 for the first time in five weeks.
Technically, gold prices are looking heavy. Sentiment on equities seem to be at the top end of the current range, but a break to the upside, will likely hurt gold prices. A close below 1,600 per ounce could lead to liquidation and a test of the 1540 and 1500 levels.
The trade: Purchase a Gold binary option put on a daily close below 1,580 will a floor at 1560.
