Gold keeps the range, risk reversals retrace long-run bullish bias

• Gold (XAU/USD) is mildly bid, awaits range breakout.
• 12-month risk reversals have retraced major chunk of XAU call bias.

Gold is mildly bid in Asia at $1,326, courtesy of rising fears of the trade war, but still stuck in a weeklong trading range of $1,330-$1,310.

The multiple daily candles with long shadows indicate the metal will likely witness an upside break of the trading range. The technical set up gels well with the current environment of global trade woes and the resulting risk aversion in the stock markets.

That said, the options market is biased bearish. The one-month 25 delta risk reversals are being paid at 0.2 XAU puts (sell gold) vs. 0.2 XAU calls (buy gold) on March 7.

Meanwhile, the 12-month risk reversals have also retraced major chunk of XAU call bias. The risk reversals are being paid at 0.375 XAU calls vs. 0.70 XAU calls on Feb. 16.

Gold Technical Levels

A break above $1,332 (50-day moving average) would expose $1,330 - upper end of the trading range. An upside break would put the bulls back in the driver's seat and allow a stronger rally to $1,366 (Jan. 25 high). On the downside, breach of support at $1,320 (lower end of the trading range) could yield a pullback to $1,309 (100-day MA) and $1,300.