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Agri-Biz & Commodities - Technical Analysis


Spot gold may head higher

Gnanasekar.T

SPOT gold prices are trading in a narrow range as the dollar moved in a choppy range tracking a series of the US economic data, indicating the vulnerability of the US economy.

But gold may have been tempered by a rather muted reaction to the dollar to the current account data, with the figure ending up being not much of a shock. Precious metals are expected to be steady and rise higher on the back of dollar weakness till the release in trade data this week and FOMC meet on the 22nd March.

The biggest support for gold currently is in the form of crude oil prices reaching all-time highs on the back of sustained growth and demand from China and India creating a demand/supply gap in the market. This supports precious metals due to inflationary fears. Gold prices could take a breather on account of the anticipated interest rate increase in the forthcoming FOMC meet next week, but the underlying trend is clearly bullish.

Spot gold prices are consolidating in a minor range, waiting for another push higher in direction of the uptrend. As expected, spot gold prices headed to $445 levels. Minor resistance is seen at $445-447 levels and daily close above this point is expected to take prices higher still into the $450 territory again or even higher.

Good support is seen at $438-440 levels currently. One minor pullback towards this point or even lower towards $437 cannot be ruled out before the big move northwards begins.

Only a daily close below $433 will negate our bullish expectations. We would like to stick to our previous wave-counts and only a move below $405 will force us to rework it.

As per our recent wave counts, the third wave ended at $433 followed by a fourth wave correction to $371 and the current move as a fifth wave, since it shows characteristics of an impulse wave.

Recent fall to $410.50 is possibly the corrective sub-wave of the fifth wave impulse.

RSI is in the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD are above the zero line of the indicator suggesting a bullish reversal. Only a crossover of the averages below the zero line in the indicator will signal bearishness again.

sPrices are above the short-term 9-day EMA at $440.10 and the medium term 25-day EMA is at $434.90. Therefore, look for gold prices to head higher.

Supports are at $438, 435 and 433. Resistances at $445, 448 and 450.25 respectively.

(The author is associated with the Multi Commodity Exchange of India Ltd. The views expressed in this column are his own and not that of his employer. This analysis is based on the historical price movements and there is risk of loss in trading. He can be reached at gnanasekar_thiagarajan@yahoo.com.)

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