Gold for February delivery on the Comex division of the New York Mercantile Exchange jumped $11.10, or 1.01%, to trade at $1,107.40 a troy ounce.

Last week we saw that India's gold import in last month of 2015 is valued to have exceeded 100 tonnes following sharp jump in demand for the precious metal during the month when prices slid harshly all over the world.

In terms of volumes India has been the world's top 2 consumer of the yellow metal.

Gold CFDs rallied to two and half months' highs amid growing concerns on Chinese economic recovery which in turn keeps us worried that the Federal Reserve will hold off on hiking cycle until H2 2016. Therefore, we believe that the there is no handsome recovery for gold unless China recovers as this country has been highest importer of gold.

Hedging Gold's Rallies:

On weekly plotting of Gold CFDs rejected resistance at 21DMA (at 1113.03 & 1108.42) twice in a row.

Spot gold edged up 0.1% 1.090.87 an ounce, while U.S. gold futures for February delivery were down 90 cents to 1089.90

Futures were likely to find support at $1,063.20, the low of January 4 and resistance at $1,091.50, last Thursday's high.

If anyone dubious about prevailing bull rallies of gold can still hold their outrights in spot while holding 2M at the money delta puts.

Write an OTM call option + hold an ATM put option (near month Call & mid-month put). Writing OTM calls may likely to fetch certain returns since any abrupt slumps in near future may be taken care by this instrument.

This helps as a means to hedge a long position in the underlying outrights by holding longs on protective put. Thereby, any declines in this commodity would be taken care by ITM put options since the holder of the put option will have right to sell at predetermined strike price at expiry in case of American style options.

So technically, the collar strategy is as good as out of the money covered call strategy with the purchase of an additional protective put. The collar is a good strategy to use if the options trader is writing covered calls to earn premium but wish to protect himself from an unexpected sharp drop in the price of the underlying security.