Gold failed to capitalize on the overnight attempted recovery move.The near-term technical set-up seems tilted in favour of bearish traders.
Gold failed to capitalize on the previous session's positive move and met with some fresh supply on Thursday, sliding back to the vicinity of the $1480 region, or weekly lows.
This is closely followed by the $1475 confluence support – comprising of 100-day SMA and the lower end of a broader trading range held over the past one month or so.
Meanwhile, technical indicators on hourly charts maintained their bearish bias and have also started gaining negative momentum on the daily chart, suggesting further downside. However, traders are likely to wait for a sustained breakthrough the trading range support before positioning for a fall towards October monthly swing lows, around the $1460 region. The downward trajectory could further get extended towards $1450-48 horizontal support, which if broken might pave the way for an extension of the recent depreciating move. On the flip side, any meaningful recovery attempt might continue to confront some fresh supply and remain capped near 50-day SMA, around the key $1500 psychological mark.
Gold risk reversals have dropped to the lowest level since May 31. The data indicates the demand for call options is falling.
One-month risk reversals (XAU1MRR) on gold, a gauge of calls to puts, has dropped to the lowest level since May 31, indicating investors are adding bets for weakness in the yellow metal.
The gauge currently stands at 0.55, having dropped in a near 90-degree manner from 1.90 over the last seven days. It represents a drop in the demand or the implied volatility (vol) premium for call options (bullish bets) and a rise in demand for put options.
That said, the number is still holding in positive territory, meaning vols for calls is still higher than the vol claimed by puts.
Gold is currently trading at $1,468 per Oz, having dropped more than 1 percent on Thursday, confirming a downside break of multi-week consolidation between $1,474-$1,520.