The Hindu Business Line : Spot gold may move higher

The dollar appreciated against the major currencies overnight, even after a bomb was found buried on a French rail line, two weeks after the Madrid train attacks. Gains in the value of the dollar against the euro surprisingly did not have a major effect on the precious metal although prices did come off from its recent monthly highs. Decline, in the price of the euro below $1.22, makes dollar-denominated commodities more expensive to holders of Europe's currency.

Other major issues for the dollar apart from the record deficits and an economy unable to add new jobs in a big way, is trouble created by Israel after it assassinated the spiritual leader of the Hamas militant group and as Pakistani troops remained locked in battle with a group of suspected Al-Qaeda fighters. Gold is trying to shed off the influence of the currencies on it with focus mainly on the political risk and the terrorism factor which will make gold a favourite investment.

Gold broke the range on the upside it has been moving for the last few months as per our expectations. The important resistance at $410 and $417 have been broken and these levels should act as good support levels now, which can contain any downside attempts.

Resistance will now be seen at $420 followed by the recent high at $430. The long-term channel seen in the chart has seen support at $387-$388 levels and the next resistance will be near the $450 levels.

With a sharp move last week we are quite convinced that the new impulse wave rally has begun and a corrective move A-B-C of the fourth wave we have been discussing in our previous up dates could have got over at $387. A close above $417 is the first sign of this impulse wave rally and only an unexpected break of $405 will force us to change our view. RSI is in the overbought zone and heading lower into the neutral zone now. The averages in MACD have gone above the zero line of the indicator decisively, which also adds strength to our bullish view.

Prices are higher than the short-term nine-day EMA at $410 and the medium term 25-day EMA is at $406. Look for prices to consolidate and head higher. Supports are at $416, 410 and 405. Resistances at $420, 428 and 432 respectively.

(The author is a Mumbai-based analyst who tracks the global commodities markets. This analysis is based on the historical price movements and there is risk of loss in trading.)

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