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Gnanasekar. T

GOLD prices moved lower on Wednesday after the Federal Reserve Chairman speaking to congressional committee painted an optimistic picture about the US economy and dismissed recent signs of fragility and reiterated that the central bank would maintain a measured tightening stance going forward to fend off inflation.

Gold prices are again stuck in a range now with no dominant trend to follow. Markets will have a close watch on oil prices for the inflationary trend. Any abnormal rise in oil prices will have inflationary pressure on the economy, which in turn will lead to a possible hike in interest rates again. Another spate of data is expected on the US economy by the end of the month. A surprisingly strong data for the dollar could ignite a short-covering rally in the dollar, which will be bearish for gold.

However, violence in the West Asia and the possibility of a delay in the US presidential election in the event of any terror attack will provide bullish undertone for bullion.

Gold prices are close to the lower end of the rising channel. Support will now be seen at $392.50, which also happens to be the rising channel support and the 200-day exponential average point. A range between $380-410 is seen in the bigger picture. A clear trend could emerge only after this range is broken either ways.

As we have been maintaining, only a break below $380 will see gold headed to its recent lows and possibly even lower to $365-368 levels. As per Elliot wave analysis, we have seen a failure of the fifth wave impulse at $433 and a sharp correction took place to $371, which is wave "A".

Wave "B" then started from $371 and possibly ended at $408.75. Wave "C" should now begin targeting lower levels, which is still our preferred view. This view holds good as long as prices do not close above the $415 levels. RSI is in the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD are still above the zero line of the indicator. A move below the zero line of the indicator will confirm a bearish reversal again.

Prices are below the short-term 9-day EMA at $403.35 and the medium term 25-day EMA is at $399.68. Therefore, look for prices to break the rising channel range lower and test the support levels. Supports are at $395, 392 and 387. Resistances at $398, 404 and 408 respectively.

(The author is associated with the Multi Commodity Exchange of India Ltd. (MCX). 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.)

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