Gold Likely to Correct Lower

Commodity prices were in a very tight range for most of the day yesterday as the return of some strength in the dollar seemed to be having little impact on their prices so far. This includes the prices of gold and oil as well as they were locked in a very tight range with no fundamental drivers on the horizon to push the prices in any specific direction. Gold prices spent most of the day below the 1290 region where they continue to trade as of this writing. They did threaten a breakout on either side but they were held up by some strong selling and buying on either side which helped to keep the prices in range. But looking at the price action in the gold prices, it increasingly looks as though the prices of gold might get weaker in the short term.

Gold Prices Under Pressure

The gold prices have found it difficult to make much headway over the last week or so and the drop from 1300 last week showed us the amount of selling there is in that region. It would not be easy for the bulls to surmount the highs of the range for now and hence the price needs to move lower so that it can pick up more buyers. Fundamentally also, we are seeing the stock markets in various parts of the world continuing to recover and this is a sign that the risk sentiment is improving. This would in turn mean that funds would get picked off from safe havens like gold and invested into the stock markets and we are likely to see this kind of a move in the short term which is likely to keep the gold prices under pressure. If the prices do move lower, then 1255 should be a good target region for traders to load their longs again.

Oil prices were also locked in a tight range but the fact that the oil prices continue to be steady and strong and near the upper half of their range suggests to us that the uptrend will continue, something that we have been mentioning in our forecasts all along.

Silver prices were also locked in a tight range, which is something that is expected, as it usually follows the gold prices. We expect the silver prices also to be under pressure in the short term as it needs to pick up more buyers to move further ahead.