Gold futures on the COMEX division of the New York Mercantile Exchange fell on Friday as profit-taking caused the precious metal to fall despite a weaker U.S. dollar.
The most active gold contract for August delivery fall 3.60 U.S. dollars, or 0.28 percent, to settle at 1,294.80 dollars per ounce.
However, gold advanced 1.48 percent for the week.
Profit-taking was the feature of the day as traders sold gold contracts, putting pressure on the precious metal, even as the U.S. Dollar Index fell against other major currencies on Friday, according to analysts.
Gold Prices rallied for a third consecutive week with the precious metal up more than 1.25% ahead of the New York close on Friday. The advance comes on the back of a fresh batch of dovish rhetoric from the FOMC with the committee lowering its growth projections as well as narrowing expectations for higher rates. The move prompted a reversal in the greenback with the Dow Jones FXCM U.S. Dollar Index (Ticker:USDOLLAR) off by 0.56% on the week.
Looking ahead, traders will be fixated on the upcoming UK referendum as well as the semi-annual Humphry Hawkins testimony with Fed Chair Janet Yellen. On the back of this week’s rate decision, Yellen’s testimony before the Senate Banking Committee on Tuesday and the House Financial Services Committee on Wednesday will be closely scrutinized as market participants attempt to ascertain both the timing and scope for Fed normalization amid the ongoing “uncertainty” she so passionately expressed on Wednesday. All eyes will be on the Brexit decision next Thursday and gold will likely see some serious volatility should voters choose to leave the EU. The immediate.
A potential Brexit has created a lot of uncertainty in financial markets; Fed Chair Janet Yellen admitted on Wednesday that it was one of the reasons why the central bank decided to leave interest rates unchanged Wednesday. But the question is with so much volatility and uncertainty, how do you play the gold market?
French bank Natixis might have the best advice for traders as Thursday, the firm’s precious-metals analyst, Bernard Dahdah, said that he prefers the gold options market ahead of the June 23 vote.
“For $10, buying a one-month gold call with a strike of $1,375/oz looks like a reasonable decision considering the potential aftermath of a leave vote,” he said in a report. “Should the U.K. vote to remain, the loss would be minimal ($10 premium), but should the U.K. vote to leave, important gains can be made.”
“A close over 1304 is needed to rekindle bull forces for a drive to 1330-1340,” said analyst at RJO Futures.
However, most analysts are looking at gold’s downside after Thursday’s sharp correction.
Sam Laughlin, precious metals trader at MKS Switzerland, said that he could see gold prices fall to $1,275 an ounce early in the week and then retest $1,300 an ounce ahead of the U.K. referendum.
Bill Baruch, senior commodity broker at iiTrader, said that he is also taking Brexit out of the equation as the metal still has plenty of potential to move higher. But in a report Friday, Baruch noted that the market is vulnerable to test support at $1,267.30 an ounce and could even fall as low as $1,242.10. “We will look to these major support levels to be tremendous buying opportunities,” he added.
CFTC - Commitments of Traders: Speculators Less Bearish on EUR, GBP; More Bullish on JPY, Gold
Speculative positioning in the CME and ICE currency, commodity, energy and index futures:
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