Gold once again traded in the range and settled with the marginal weakness at 31876 with a fall of -0.10% as rupee strengthened on hopes the government would kick-start long-awaited fiscal reforms by hiking fuel prices, but further gains were prevented by dollar demand from oil firms and a week full of key events. Pressure also seen on higher side as investors looked ahead to a key German Constitutional Court ruling as well as the conclusion of the Fed’s two-day policy meeting, both due later this week. Market players awaited a key German court ruling on whether the euro zone's permanent bailout fund, the ESM, is compatible with German law. Germany’s approval will be necessary in order to implement the ECB’s bond purchasing program announced last week, dubbed OMT. Meanwhile, markets continued to eye the outcome of the Fed’s policy meeting on Thursday, amid fresh speculation that the US central bank may announce QE3. Moves in the gold price this year have largely tracked shifting expectations as to whether the US would pump more money into the financial system. Gold prices have rallied on past monetary stimulus measures. Investors tend to flock to gold on fears that excess liquidity would erode the value of fiat currencies and spark inflation. Now technically market is in overbot as RSI for 18days is currently indicating 78.82, and getting support at 31798 and below could see a test of 31721 level, And resistance is now likely to be seen at 31963, a move above could see prices testing 32051.

Trading Ideas:

Gold trading range for the day is 31721-32051.

Gold ended with weak node as rupee firmness weighed on prices but downside was limited as the dollar fell

Gold also benefits from rising expectations that a German court will back the euro zone bailout fund

Record high domestic gold prices have deterred buying in India, and could cut imports