Gold Price Forecast: Failed Breakout, Call Unwinding Gathers Pace

Gold witnessed a bullish Bollinger band breakout on Friday, but the follow through on Monday was a disaster. The yellow metal fell to $174 on Monday and closed on a weak note at $1279. 33 levels. The drop could be blamed on the rise in the US 10-year treasury yield and the resulting strength in the USD index.

As of writing, Gold is flat lined at $1280 levels.

Daily chart – Failed breakout

The above chart shows-

Failed bullish Bollinger band breakout.
Bulls struggle to push prices above $1300 despite descending channel breakout and strong basing around $1263-$1260 levels.

The data published by CME for gold November expiry options show the investors are getting increasingly nervous about the metal's failure to capitalize on the bullish setup.

Gold OGZ7 Open Interest Change: Current (Nov 20 – Prelim) vs Nov 17

Call Summary (CME)
Total ITM OTM
OI Chg OI Chg OI Chg
274,188 -646 27,941 -178 246,247 -468

 

Put Summary (CME)
Total ITM OTM
OI Chg OI Chg OI Chg
168,333 -305 25,410 109 142,923 -414

The open interest (OI) or open positions in call options fell by 646 contracts yesterday. Meanwhile, put options OI fell by 305 contracts, although the in the money puts witnessed an additions of 109 contracts.
Gold OGZ7 Open Interest Change: Current (Nov 20 – Prelim) vs Nov 13

Call Summary (CME)
Total ITM OTM
OI Chg OI Chg OI Chg
274,188 -4,418 27,941 -1,008 246,247 -3,410

 

Put Summary
Total ITM OTM
OI Chg OI Chg OI Chg
168,333 721 25,410 470 142,923 251

Over the last one week, the open interest in call options has gone down by a staggering 4418 contracts. On the other hand, the open interest in put options has increased by 721 contracts.
The uptick in the open positions in put options (bearish bets), coupled with sharp unwinding in calls (bullish bets) indicates potential for a drop below the key support of $1260.

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