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Gnanasekar. T

SPOT gold prices shot higher on Wednesday amid a weaker dollar and strong crude prices post Tuesday's rate increases by the Federal Reserve. This despite, a robust growth in the job market numbers, which came in higher than market expectations at 207,000 last Friday.

This could be a possible signal that the dollar strength is coming to an end. Dollar slumped to a two-month low after markets digested the Fed's latest increase to benchmark interest rates.

Reaction to the decision was mostly subdued as the increase was factored-in. Oil prices have once again lent support to gold as an inflation hedge. Markets shrugged off a strike by gold miners in South Africa, as current supplies are ample enough to meet waning physical demand presently.

Spot gold prices found support at $433 levels and rallied higher from there. As mentioned earlier, a triangle pattern is seen in the bigger picture, which is bullish in nature. Strong resistance will now be seen at $440-442 also being the trend line resistance point.

And a daily close above the fractal top of $444 will set a very bullish tone for gold prices to rise higher towards the recent high at$ 458 or even higher.

Major support points to watch for will be $433 followed by $431. Only a move below $427.50 will throw doubts on the sustenance of current up trend. We will decide on a change in the wave counts if we see a break of $444-45 up side.

As per our recent wave counts, the third wave ended at $458 followed by a fourth wave correction to $410 and the fifth wave appears to have begun from there.

A move below $421 will negate this count we have adopted recently. RSI is in the neutral zone indicating that it is neither overbought nor oversold.

The averages in MACD are above the zero line of the indicator suggesting a bullish reversal. The short-term 8-day EMA is at $434.75 and the 34-day EMA is at $429.95. Therefore, look for spot gold prices to test the resistance levels.

Supports are at $435, 433 and 431. Resistances are at $440, 442 and 445.

(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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