September 20, 2012 / 5:16 AM / 7 years ago

Gold ends flat as open interest hits one-year high

NEW YORK (Reuters) - Gold ended nearly flat on Thursday as the market paused after its recent sharp rally, while a key technical-chart formation suggests momentum is turning increasing bullish.

Gold Bullion from the American Precious Metals Exchange (APMEX) is seen in New York, September 15, 2011. REUTERS/Mike Segar

Even though the metal’s price was little changed for a second consecutive day, open interest in U.S. gold futures rose to a one-year high, a sign that volatility could spike after an option expiration next week.

On Thursday, the metal traded in a relatively narrow $20 range, largely tracking a flat U.S. equities market. Bullion investors held their bets after the metal’s strong gains that followed new monetary stimulus by central banks around the world.

Spot gold was down 0.1 percent at $1,767.90 an ounce by 3:58 p.m. EDT (1958 GMT).

U.S. COMEX gold futures for December delivery settled down $1.50 an ounce at $1,770.20, with trading volume in line with its 30-day average, preliminary Reuters data showed.

COMEX futures’ open interest, which measures the total outstanding long and short contracts, rose to a one-year high at 481,999 lots as of Wednesday.

“This could lead to greater volatility at the end of next week after (COMEX) option expiration as there are now many new longs at high prices anxiously watching signs from other markets,” said George Gero, vice president of RBC Capital Markets.

Open interest of U.S. gold futures has gained about 25 percent in the past 30 days.

Gold has gained nearly $200, or 10 percent, in the past four weeks. A new round of bond buying by the U.S. Federal Reserve last week and loose monetary policies from other major central banks have rekindled the metal’s appeal as a traditional inflation hedge.

TECHNICAL OUTLOOK BRIGHT

A “golden cross” formed on spot gold’s price chart gives bullion investors another reason to increase their bullish bets.

On Thursday, gold's 50-day moving average (DMA) traded above its 200 DMA, which marked a golden cross in technical analysis, indicating bullion's intermediate and longer-term momentum is getting increasingly bullish. (Golden cross graphic: r.reuters.com/tas72t)

“Given shorter-term moving averages have all turned higher in recent weeks and the bullish price action recently, this golden cross today is an additional indicator of strength in an already strong market,” said Adam Sarhan, chief executive of Sarhan Capital.

Among other precious metals, silver edged up 0.1 percent at $34.60 an ounce, while spot palladium was down 0.9 percent at $660.47 an ounce.

Spot platinum fell 0.6 percent to $1,622.49 an ounce. The metal has fallen by more than 5 percent this week, on track for its biggest weekly drop since December, as strike action at No. 3 platinum miner Lonmin’s LONJ.J Marikana mine in South Africa wound down.

Additional reporting by Jan Harvey and Amanda Cooper in London; Editing by Bob Burgdorfer

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