GOLD TODAY – Prices consolidate but remain vulnerable

Short Term: Medium Term: Long Term: Resistances: R1 1191.60 Oct 2015 high R2 1235 20 DMA R3 1250 40 DMA R4 1280 200 DMA R5 1298 Lower line Jul>Sep flag R6 1328 Long-term DTL (all-time/Oct 2012 high) R7 1375.25 High so far R8 1380 38.2% retracement ( Sep 2011 high > Nov 2015 low) R9 1388.70 High Mar 2014 R10 1434 High Aug 2013 Support: S1 1298 100 DMA S2 1280 200 DMA S3 1274 UTL YTD rally S4 1250 40 DMA S5 1235 20 DMA S6 1224 DTL Oct 2012/May 2016 S7 1206 61.8% retracement Dec 2015 low – May 2016 high S8 1207 Support line Apr-Jun S9 1181 61.8% retracement YTD rally S10 1168 DTL Aug 2013/Mar 2014 S11 1164 50% retracement Dec 2015 low – Mar 2016 high S12 1112.50 Jan 8 peak S13 1086 1999-2011 50% Fibo S14 1046.40 Dec 2015 low Stochastics:Crossed higher in low ground Legend: R/SL= Resistance/support line UTL = Uptrend line BB = Bollinger band Fibo = Fibonacci retracement line Technical Comment Analysis A modest relief rally is under way in gold after the metal dipped to a nine-month low of $1,171.30 per oz last week, finding support from the August 2013/March 2014 DTL. Gains stalled ahead of $1,200 per oz yesterday. The stochastics have crossed higher but the fast line has turned lower, implying fading momentum. We expect further support around $1,181 per oz – the 61.8% Fibo of the year-to-date rally – and at $1,168 (August 2013/March 2014 DTL). Additional support is seen at $1,164 per oz – the 50% retracement from the Dec 2015 low to the May 2016 high Resistance above is seen at $1,220 and from the 20 DMA at $1,235 per oz. Macro picture  The latest CoT data showed net length among Comex speculators dropped a further 10,575 contracts or 6% in the week to November 22. Funds/CTAs liquidated a further 4,104 contracts of longs. But the recent price correction has also attracted short-selling – the gross short position increased 6,471 contracts last week. The gross short position totals 74,561 contracts compared with 62,515 contracts early in September but is still well below the peak of 149,042 contracts in December 2015, which suggests that speculators, while not overly bullish, are not particularly bearish either. ETF holdings continue to decline as investors rotate into riskier asset classes. ETF holdings total 2,060 tonnes, down from a recent 2016 peak of 2,176 tonnes. There remains the risk of further disinvestment in the short term. Prices have broken below the May-June lows between $1,207 and $1,199.90 per oz – investors added a sizeable 135 tonnes of gold in June. But ETF holdings remain up 580 tonnes so far this year, which implies investors still view gold as a portfolio diversifier. Meanwhile, physical demand has picked up thanks to seasonal demand for jewellery but also because lower prices have triggered a pick-up in demand for coins and bars from retail investors. Indian gold imports jumped to an estimated 86 tonnes in October – this compares with an average of only 26 tonnes in the July-September period. Reports also point to a rush of wholesale-level buying, triggered by concerns official may take further measures to curbs imports and monetise existing gold stocks after the government recently withdraw high-denomination bank notes from circulation. Meanwhile, the latest data from the US Mint showed American eagle coin sales are running at a 133,000-oz pace so far in November, the fastest pace since January. According to the WGC, global gold demand fell 10% year-on-year to 992.8 tonnes in the third quarter. Stronger investment demand, which rose 44% year-on-year, was more than offset by weaker jewellery demand, which fell 21% year-on-year. Conclusion Dip-buying from the physical sector continues to provide underlying support but we maintain our view that gold will remain under modest pressure in the short term, at least until the December FOMC meeting. All trades or trading strategies mentioned in the report are hypothetical, for illustration only and do not constitute trading recommendations.

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