Tokyo gold futures fell by nearly two percent on Friday as Japanese investors lightened positions ahead of the weekend after prices drifted below key chart levels, reflecting falls in dollar-based prices. But traders were careful about selling too heavily as tensions over global security remain high.
Technical factors have been recently driving down Tokyo Commodity Exchange gold futures, with selling pressure increasing early on Friday after the benchmark June contract fell below the 14-day moving average (MA) of 2,382 yen.
Key June TOCOM gold futures briefly fell by the daily 60 yen limit to 2,353 yen a gram - the lowest since July 11 - but bounced off the lows as short holders squared off positions.
June TOCOM gold closed at 2,373 yen a gram, down 40 yen or 1.66 percent from Thursday's close of 2,413. Other contracts closed down 30 to 40 yen. "The market is trying to find a support level after a volatile week," said Shuji Sugata, assistant manager at Mitsubishi Corp Futures and Securities Ltd.
"The market sees 2,300 yen as the next key support level, but falls below that level could be limited because of geopolitical concerns," Sugata said. Traders said key gold will find support at the 100-day MA of around 2,292 yen and the 30-day MA of 2,281 yen. It last fell below 2,300 yen on July 4.
Gold was expected to be well-bid on dips due to continuing hostilities between Israel and Hizbollah fighters in Lebanon, but sentiment was dampened, reflecting recent sharp falls in copper and crude oil prices. Spot gold extended losses on Friday after falling around 1.5 percent in New York, as investors cut short a rally sparked by expectations of lower inflation.
As of 0641 GMT, gold was trading at $625.80/626.50 an ounce, down from $632.00/633.00 in the US market late on Thursday. On Wednesday it fell to a two-week low of $617.95. "The market is heading down as more investors are lightening their positions after recent sharp price moves," said a manager at Japanese trading house.
"Right now there are no distinct factors to drive gold in one direction, but there is good support around $620," he said. Traders said bullion is likely to be supported at the 100-day moving average of around $615.
Other TOCOM precious metals fell in line with gold. Key June TOCOM platinum futures closed at 4,460 yen a gram, down 26 yen or 0.58 percent from Thursday. They had moved in a range of 4,388 to 4,472 yen.