Gold recovers from 2-week lows, rising trend line holds

Gold [XAU/USD] has recovered from the two-week low of $1314, although heightened odds that Fed would maintain the gradual pace of tightening are capping gains. Currently, the metal is trading at $1320 levels.

The rebound from the low of $1314 to $1320 has ensured the trend line sloping upwards from the July 10 low and Aug 8 low is intact.

Risk reversals turn negative

• The one-month 25-delta risk reversal which measures the volatility difference between a call option and a put option, turned negative last week and currently stands at -0.125.
• The negative print indicates the increased demand for the bearish bets, i.e. put options.

Gold Technical Levels

A break above $1322 [5-DMA] would open doors for $1334 [September 15 high]. A daily close above the same would indicate the pull back from the high of $1357 has ended. Above $1334, the metal may target Sep 8 high of $1357.

On the downside, an end of the day close below the rising trend line support of $1317 could yield a sell-off to $1305 [Aug 30 low] and $1298.66 [Aug 31 low].