The Hindu Business Line : Spot gold may rise higher

SPOT gold prices rallied higher as the dollar weakened post the non-farm payroll data. Gold got an extra lift after the US Labour Department said non-farm payrolls rose 262,000 in February, a much better number than market expectations. But the jobs' picture was confused by a rise in the unemployment rate to 5.4 per cent from 5.2 per cent in January.

Precious metals are expected to be steady and rise higher on the back of dollar weakness till the release of trade data this week and FOMC meet on the 22nd March. The catalyst for the late acceleration was a rise in the Euro to a nine-week high. That attracted investment funds into commodities priced in the depreciating US currency.

Gold also benefited from fears of higher Euro interest rates, which took the shine off the dollar.

Spot gold prices moved higher in line with our broad expectations. As expected, support was strong below the $430 levels from where prices based out for an upward rally. Corrective moves are possible on the back of indicators lying in overbought conditions. The overall trend is very bullish and any corrective dips should be viewed as an opportunity to enter again and should not be construed as an opportunity to sell for a short-term gain as the old saying goes "trend is the friend".

As long as $428-30 holds the downside, we can expect spot gold prices to test $445-448 in the coming weeks or even higher. Only a daily close below $433 will negate our bullish expectations. We would like to stick with 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 overbought zone now indicating a downward correction to take place. 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.

Prices are above the short-term 9-day EMA at $435.47 and the medium term 25-day EMA is at $430.96. Therefore, look for corrective moves to hold support and rise higher. Supports are at $ 438, 433 and 430. Resistances at $ 442, 445 and 448 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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