FxWirePro: Gold gains to sustain, fresh short build up is absurdity – diagonal straddles suit delta risk reversal

We could envisage precious metal gains for next 1M-3M despite red flag for far month contracts. Yes, indeed gold slides may be temporary, the current slumps probably due to profit booking trades.

We could see strong resistance at 1200 levels, both weekly and monthly oscillators signal bullish convergence to approach this level even though some minor corrections are expected.

On the flip side, we could eye on bear trend only below 1172.69 levels and fresh shorts can be initiated below these levels, until then hold your nervous and patience, otherwise bulls would certainly attack and wipe of recent gains.

Caution: The prevailing prices have fallen above moving average curve on all EOD, weekly and monthly charting pattern that divulges current rallies to sustain for some more days. We can also observe the bullish sentiments are piling up for next 1-3 month time frame, interpreted from overpriced ATM call options.

On the Comex division of the NYMX, gold futures for December delivery were down 0.88% at $1,177.50. The December contract ended Thursday's session 0.65% higher at $1,187.50 an ounce.

Futures were likely to test support at $1,167.30, Wednesday's low and resistance at $1,188.30, yesterday's high.

Hence, diagonal straddles can be established as follows using at the money delta call contracts with near month expiry while holding far month out of the money put contracts.

This ATM contract along with prevailing upswings would indeed turn into in the money sooner or later within expiry. By then, XAUUSD may test upper channel line pondering leading oscillators on weekly to hit overbought territory.