The Hindu Business Line : Spot gold may consolidate

SPOT gold prices fell further lower due to weakness in the euro currency. A rejection of EU constitution in France over the weekend triggered the fall in Euro and the Dutch also voting against the EU constitution further added to bearishness.

Demand/supply data from the World Gold Council has, however, been encouraging. The World Gold Council said first-quarter demand was 977 tonnes, up 26 per cent year-on-year, lifted by jewellery and investment purchases, while supply rose 23 per cent to 1,043 tonnes, mostly on increased central bank sales.

Silver has taken the lead in the bullion complex due to heavy fund buying and has been cushioning gold prices from falling drastically lower. Spot gold prices corrected higher but could not follow-through on the back of weakness in the euro. The long-term trend line support point at $416.50 has also been broken. Any corrective bounce could now be resisted quite strongly at $420-422 levels. And as long as $423.50 caps the up side which also happens to be the 200-day EMA level and fractal top point both having a technical significance, expect gold prices to be range-bound and inclined to test the support levels in the near-term.

We will continue to maintain the wave counts as in the previous update, till we see a clear break of $438 on the up side. 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 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 are below the zero line of the indicator in the daily chart signalling bearishness. Only a crossover of the averages above the zero line in the indicator now will signal a bullish reversal.

Prices are below the short-term 8-day EMA at $418.28 and the 34-day EMA is at $423.38. Therefore, look for gold prices to consolidate and edge lower initially followed by a good retracement higher.

Supports are at $416.25, 413 and 410. Resistances at $418.30, 420.50 and 423.50 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.)

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Mixed trend in spot rubber continues

Spot gold may consolidate

Copper, zinc rates cut

Stocks may rein in cotton prices

Edible oil imports top 5 lakh t in May

Sopa seeks tariff rate quota for soya oil import

Cardamom steady on buying support

Weather proof