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Another week of strong gold buying has now raised the alarm bells given the risk of long liquidation should the yellow metal fail to hold onto its US CPI price boost above $1830. Last week the net long in gold reached a 14-month high at 164k lots and the speed of the accumulation, especially the 70% jump during the past two weeks alone carries, will be raising a red flag for tactical trading strategies looking for pay day on short positions should support give way.

Gold extended Friday’s drop below $1850 overnight, before bouncing ahead of key support in the mentioned $1830-35 area. The risk of a quicker withdrawal of Fed stimulus supporting real yields and the dollar has for now reduced gold's ability to build on the technical breakout. Fed expectations and a stronger US dollar might keep a lid kept a lid on further gains for gold prices.

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From a technical perspective, spot prices managed to find some support ahead of the $1,834-32 strong horizontal resistance breakpoint. This should now act as a key pivotal point and help determine the next leg of a directional move. A sustained break below would prompt some technical selling and accelerate the fall towards the $1,808-07 region en-route the $1,800 mark.

On the flip side, some follow-through buying beyond the $1,850 level might trigger a short-covering move and push gold towards the $1,865 resistance zone. The next relevant hurdle is pegged near the $1,875-77 area (multi-month highs), above which the XAU/USD could aim to reclaim the $1,900 mark for the first time since June.





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