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Gold: Off 19-month lows, put value at one-month high

8/16/2018, 11:47:59 AMMarket Analysis
Gold: Off 19-month lows, put value at one-month high

Currently, gold (XAU/USD) is trading at $1,172, having dropped to $1,160 - the lowest level since January 2017 - earlier today.

The recovery from the 19-month low could be associated with oversold conditions shown by the relative strength index (RSI). Further, the daily candle now carries a long tail, which indicates bearish exhaustion. So, it seems safe to say the metal may have bottomed out for now.

 However, the put value, as represented by risk reversals, has jumped to one-month highs. For instance, the one-month 25 delta risk reversals (XAU1MRR) fell to -0.925 today -  the lowest level since July 20 - indicating the investors are expecting a further drop in gold prices and hence are likely buying put options.

In simple terms, risk reversals indicate the investors are expecting a corrective rally to be short-lived. 

Gold Technical Levels

Resistance: $1,176 (session high), $1,190 (5-day moving average), $1,200 (10-day moving average + psychological hurdle)

Support: $1,160 (session low), $1,142.97 (March 2015 low), $1,122.81 (December 2016 low)