GOLD

FUNDAMENTALS

Gold futures climbed higher on Monday breaching $900 mark as soaring crude oil prices increased the demand for metal as inflation hedge.  Firmness in dollar meanwhile contained the gains in the gold prices to some extent. Gold for June delivery added $5.90 to close at $905.8 an ounce on COMEX.  It hit an intraday high of $904.50.

Stronger dollar during the session also pressured the prices. The US currency recovered from a two-week low against the euro, extending gains after a rise in U.S. leading economic indicators, which increased the expectations that Fed hike interest rates later this year. The dollar index increased to 73.092 from 72.799 on Friday. If the dollar extends its gains, gold’s recent rally might be stalled.  Record high levels of crude oil prices and the dollar's attempts to recover are making the sentiments mixed in the gold market at this stage.

Gold oil ratio has recently seen the lows of 7, which is significantly below the historic norm. So, if these two markets follow the historical relationship, the ratio should recover. With the oil not expected to come down significantly in short run, the downside potential would be limited for the gold prices.

The Comex gold net long position of the funds fell to a seven-month low on May 13 according to CFTC data. The funds were net long by 153,819 lots for futures and options combined, the lowest level since Sept. 11 and down from 157,095 after the week to May 6. The large commercial accounts were net short by 181,234 lots.

TECHNICALS

The prices closed above the 9-day and 18-day EMA, which supports bulls. MACD is heading upwards in positive zone, which shows bullish momentum in the market. RSI is heading upwards in normal region. The prices might see some more firmness.

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