Gold witnessed a bullish descending triangle breakout last week, but the follow-through ran out of steam at $1290. Prices fell back to $1270 yesterday before regaining some poise to trade around $1280 levels.
Despite the last week's failure at $1270, the outlook still remains bullish as the big jump in the open interest (OI) or open positions in the Gold Nov. expiry call options signal the metal is likely to witness a bullish cup and handle breakout.
Gold OGZ7 Open Interest Change: Current (Nov 14 - Prelim) vs. Nov 7
| Call Summary | |||||
| Total | ITM | OTM | |||
| OI | Chg | OI | Chg | OI | Chg |
| 278,702 | 1,419 | 31,713 | -1,017 | 246,989 | 2,436 |
| Put Summary | |||||
| Total | ITM | OTM | |||
| OI | Chg | OI | Chg | OI | Chg |
| 167,356 | -4,656 | 22,562 | 145 | 144,794 | -4,801 |
- Over the last one week, the open positions in call options have gone up by 1419 contracts, while the open positions in the put options declined by 4656 contracts.
- Clearly, the bias is bullish. Not only are investors betting on the upside, but they are also less concerned about a bearish move in prices, which is evident from the drop in the OI in the put options.
The odds are stacked against the bears
- Bullish open interest change as detailed above.
- Bullish descending triangle breakout.
- Repeated failure on the part of the bears to keep the prices below the 100-day MA.
- The US Treasury yield curve continues to flatten, signaling weakness in the USD.
View
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- The metal is likely to witness a bullish cup and handle breakout soon. A move above $1284 would confirm a bullish break and shall open doors for a rally to $1306 (Oct. high).
- On the downside, only an end of the day close below the 200-day MA of $1264 would signal the continuation of the sell-off from the high of $1357.52 (Sept. high).
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