Gold saw a sharp pull-back this week after rallying to a record high of $1913.5 an ounce on Tuesday.
 
The precious metal traded at $1740.38 on Thursday morning, as the market started to speculate that the Federal Reserve Chairman Ben Bernanke will not signal QE3 on Friday following better-than-expected durable-goods orders. Gold was also knocked down by the CME’s decision to raise margins on Wednesday evening. This is the second time this month the CME has raised margins on futures to curb speculative inflows.
 
The CME said the minimum cash deposit for borrowing from brokers to trade gold futures will rise 27% to $9450 per 100-ounce contractive in the speculative Tier 1 category. The maintenance margin will be hiked to $7000 from $5500. On Friday the Fed chairman will deliver a speech at an annual symposium in Jackson Hole, Wyoming. At last year’s conference he signalled QE2, although this time around the Fed could refrain from signalling additional QE and perhaps argue that the US is only going through a soft patch.
 
I am not surprised to see the sharp decline in gold – as mentioned in last week’s gold commentary, the metal was trading at extremely overbought levels and was poised for a sharp pull-back. The precious metal has breached the 20-day Exponential Moving Average (EMA), while the standard Moving Average Convergence Divergence (MACD) indicator is showing a bearish crossover. From a purely technical perspective, gold could continue to correct further from the current price of $1740.38 with scope to test $1685 and $1630 an ounce.