Last week

Gold had a little short-covering and ended higher last Friday after the non-farm payroll report showed a 4.6% unemployment rate, down from 4.9% in Oct, the lowest level since August 2007.

In addition the Italian constitutional referendum this weekend also encouraged shorts to cover to avoid any unexpected volatility.

Last week’s trades

The trade last week was fairly clear. The price started the week right at Nat’s key line and lingered there until Wednesday, when it dropped sharply.

It never quite reached Nat’s first support level $1159, but the short-term support around $1170 gave alert traders a reasonable point to exit.

The full move was worth about $2,500 per contract.

This week

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The short-term, medium term and long-term indicators all started to point to an oversold condition in GOLD.

This week we may see one more push on the downside if the price fails to move above the $1187.50 level. But the retracement could be bought by shorts taking profits above $1145.

$1181.50-$1185.50 will be a key zone to watch carefully this week. A rally from that level it could force some shorts to cover, and push the price up around $1205/$1199 zone. Even though the price outlook remains bearish, profit taking can’t be avoided over the coming major holidays.

$1158-55 will be the first support and $1145-38 will be major support for this week. As long as Gold doesn’t move below it, we expect to see buying on the dip and selling on any strong rally this week.

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