Bullion market hopes end of losing streak on wedge formation

Gold dropped 1% on Monday as the dollar gained against the euro after leaders struck a deal to negotiate a Greek bailout, while signals the US Federal Reserve was still on track to raise rates this year also weighed. Greece won conditional agreement to receive a possible USD 95 billion over three years.

Bullion traders said emergence of buying by jewelers and retailers at existing levels amid a positive global trend mainly attributed recovery in gold prices.

The precious metal has been tumbling consecutively from last couple of weekly but it seems to test support at 1145.58 to bounce back. Falling wedge formation has already occurred on weekly charting, since this is bullish pattern regardless of trend reversal or continuation.

With the bulls catching optimism, traders in this commodity rushing up to buy at this level so as to catch the best optimal entry price, on a hedging front buying naked calls are also looking attractive as the delta and corresponding option greeks suggest the prices of these options are fairly priced in.

But both the oscillating indicators converging falling prices. RSI (14) converging the falling prices at 40.3992, while slow stochastic evidences the %D line crossover below 20 levels.  (Currently %K line at 7.8657 & %D line at 14.0285).