The Hindu Business Line : Gold may test resistance, fall

SPOT gold prices pulled back higher posting sharp gains shrugging off a rising dollar and re-asserting its safe-haven status. Gold looks to have decoupled from the currency/energy markets presently.

Spot gold prices recovered strongly after testing the support levels. Prices found support at the crucial $455 an ounce, also being the fibonnaci 38.2 per cent retracement for the move from $413 to $480 as seen in the chart above. Strong resistance will now be seen at $470-471 levels.

Only a daily close above $476 will force us to reconsider our bullish view on spot gold, which we abandoned last week and subsequently target $490 as per our earlier stance. Till then we would prefer to look at the present move as a corrective rally towards the up side. As per our recent wave counts, the third wave ended at $458 followed by a fourth wave correction in the form of wave A to E, which ended at the recent low of $418 and the fifth wave looks to have possibly ended at $480.63.

A move below $448 will confirm this view and signal the beginning of a larger correction lower. RSI is in the neutral zone indicating that it is neither overbought nor oversold. The averages in MACD have gone below the zero line of the indicator suggesting a bearish reversal. Only a cross-over of the averages above the zero line will signal bullishness again. Prices are above the short-term 8-day EMA is at $463.50 and the 34-day EMA is at $463.85. Therefore, look for spot gold prices to test the resistance levels initially and then fall lower. Supports are at $463, $458 and $455. Resistances are at $468, $470 and $473.

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

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