Gold Price Forecast: Short-term bearish bias as Put option OI spikes

Omkar Godbole FXStreet Contributor

Gold prices have dropped nearly $20 this week and the data published by the CME for Gold October expiry options suggests the losses could be extended further to $1260-1250 levels.

Gold OGX7 Open Interest Change: Current (Oct 16 - Prelim) vs Oct 13

Call Summary
Total		ITM		OTM
OI	Chg	OI	Chg	OI	Chg
106,043	-1,510	18,035	-120	88,008	-1,390

Put Summary
Total		ITM		OTM
OI	Chg	OI	Chg	OI	Chg
77,712	1,605	7,732	-11	69,980	1,616

The open interest/open positions in call options fell by 1510 contracts on Monday and the open positions in put options jumped by 1605 contracts
Clearly, the bearish investors not only squared off bullish bets (call options) but also boosted bearish bets (put options)

Gold OGX7 Open Interest Change: Current (Oct 16 - Prelim) vs Oct 9

Call Summary
Total		ITM		OTM
OI	Chg	OI	Chg	OI	Chg
106,043	1,294	18,035	89	88,008	1,205

Put Summary
Total		ITM		OTM
OI	Chg	OI	Chg	OI	Chg
77,712	3,315	7,732	87	69,980	3,228

Over the last one week, the open positions in put options have gone up by 3315 contracts, while the open positions in calls have improved by 1294 contracts.
Again, the bias is bearish
It also indicates the investors lacked trust in the gold rally from $1283 (Oct 10 low) to $1306 (Monday's high).

Daily chart

Lower high at the 50-DMA hurdle
Stochastic has turned bearish
RSI favors the bears

View

Gold could re-test the 100-day moving average lined up at $1277 and may extend losses to $1260 (recent low). On the higher side, an end of the day close above $1306 (Monday's high) would revive the bullish move.

The long-run outlook remains bullish as discussed below:

Fed Review: Balance sheet taper is good news for Gold

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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