Gold is trading largely unchanged around $1,292 but looks weak if we take into account the repeated failure to cross the 20-day moving average last week.
Moreover, the zero-yielding safe haven yellow metal found no takers last week, despite the Italian political crisis and the resulting risk aversion in the equity markets.
Risk reversals show a pick in demand for puts
The XAU/USD (gold) weekly 25 delta risk reversals are being paid at 0.375 XAU puts vs. 0.125 XAU puts. The rise in the implied volatility premium for XAU puts (from 0.125 to 0.375) indicates the investors are likely buying put options again, possibly due to fear the yellow metal may drop sharply ahead of the Fed.
The central bank is widely expected to hike rates by 25 basis points this month.
Gold Technical Levels
The support is seen at $1,288 (Friday’s low), $1,282 (recent low), and$1276 (100-week moving average). Meanwhile, the metal may face resistance at $1,300 (50-week moving average + 5-week moving average), $1,308 (200-day moving average), and $1,318 (50-day moving average).