The Hindu Business Line : Spot gold may move higher

SPOT gold prices managed to stay in a broad range despite a strengthening dollar, which normally tends to be bearish for the metal. FOMC meet is round the corner and the markets have already started building expectations of a sharp rate rise due to the threat of inflation to US economic growth.

Precious metals failed to move in tandem with the euro this week as other factors underpinned metals prices.

Going forward, markets would now keenly await (advance first-quarter) GDP and jobless claims data on Thursday, which could provide more clues on the US economy ahead of the FOMC meet.

Spot gold prices tested the resistance levels as per our expectations. Important resistance at $438 was nearly tested. Subsequently, prices tumbled lower to 9-day lows. Crucial support for this up trend to sustain is at $431.50 followed by psychological support at $430. A long-term triangle pattern is seen in the chart above, which is bullish in nature.

And as long as the two important support points hold, look for gold prices to continue heading higher. As mentioned in the previous up date, caution needs to be exercised on getting excessively bullish based on the current up trend and only a daily close above $442.50 could be the trigger for a rally towards the recent high at $446 or even extend higher to our earlier long-term objective at $475.

We will continue to maintain the wave counts as in the previous update, till we see a clear break of $443. As per our recent wave counts, the third wave ended at $433 followed by a fourth wave correction to $371 and the fifth wave also looks to have ended at $457.75. This was followed by a corrective move wave "A" to $410.50 followed by a wave "B" pullback to $446.70. Currently we are tracking a wave "C" and as per equality target should test the psychological $400 levels.

RSI is in the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD have gone above the zero line of the indicator in the daily chart signalling bullishness an important reason for our up side bias now. Only a crossover of the averages below the zero line in the indicator now will signal a bearish reversal.

Prices are above the short-term 8-day EMA at $433.15 and the 34-day EMA is at $430.65. Therefore, look for gold prices to test the support levels in the coming week and move higher again.

Supports are at $431.50, 430.00 and 428. Resistances at $ 435, 438 and 442.50 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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