The chips are down for Gold and this has happened at least twice since the metal came off an all time high around six weeks ago. The yellow metal witnessed a massive sell off yesterday as prices neared $1180 per ounce in the New York floor trades as US equities continued to liven up following the results of the European banks stress test and slightly upbeat US housing data. Prices are failing to show a revival in Asia and it looks like that the waning strength in the US dollar is also not being able to inflict much of a positive influence. Gold succumbed from follow up selling yesterday as the retreat in the yellow metal from $1200 per ounce levels were taken as a sign that the undertone remains fragile in the yellow metal. The strength in dollar also hurt the demand for bullion and COMEX Gold was seen backing off from gains in the Asian trades. Investors seem to be in a dilemma as the worries over global economic recovery have not been able to keep gold afloat above $1200 off late, though they have provided some cushion around $1175-80 per ounce mark-, which was the lowest level in two months for the commodity. The commodity ended in red on Friday as quick sell off in New York saw the prices tumble under $1190 per ounce mark. Prices drifted lower and ended flat for the week after the results of stress tests on European banks revealed a mostly sound financial sector in the Euro zone's major markets. This weakness extended yesterday as the DOW futures recovered and the metal continued to lose some of its safe-haven appeal and doubts were raised on physical buying under $1,200 an ounce levels. Gold rose $6.10 to as high as $1194.50 in Asia but then tumbled to an intraday low as $1179.80 in New York before staging modest comeback. However, the prices failed to move pass $1185 per ounce mark. COMEX futures hit a high of $1184.90 and are currently trading at $1184.10, up exactly one dollar from the previous close. Gold had struck a lifetime high at $1,264.90 in early June. The investment demand has not taken a severe hit though. The world's largest gold-backed exchange-traded fund, SPDR Gold Trust said its holdings were unchanged at 1,302.046 tonnes yesterday. The holdings hit a record at 1,320.436 tonnes on June 29. MCX Gold futures neared Rs 18100 per 10 grams in the evening trades after a false breakout earlier in the day and closed down Rs 114 or 0362% at Rs 18143 per 10 grams. The selling intensified after the Rs 18200 mark was broken and traders entered some shorts. This is an interesting development from the near term price perspective. The counter is expiring on 5th August and the open interest has been rising in the last few days. This could prompt some short covering in case if the prices near Rs 18000 per 10 grams levels. For today, some bounce back looks to be in the offing. We had expected a major correction after a break under Rs 18200 levels and are not expecting this threshold to act as a stiff upside barrier. Watch out for a rise in early moves towards Rs 18172-80. Trend is unclear unless a break above Rs 18200 takes place.

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