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Gnanasekar. T

SPOT gold prices ended lower on Wednesday hitting a one-month low amid a stronger dollar and speculative liquidation on the back of retreating oil prices. Having posted rapid gains earlier, a technical correction was in the offing due to overbought conditions in the market. Aside from maintaining its inverse link with the dollar, gold was also tracking oil prices closely for direction. Fall in gold prices were essentially triggered by strong net inflows into the US.

Spot gold rallied sharply higher as per our expectations and then subsequently corrected lower due to overbought conditions. Bigger picture looks quite bullish and as mentioned earlier, the triangle pattern is bullish in nature and a break above the resistance point is expected to see gold prices rise higher towards the recent high at $458 or even higher.

Major support points to watch for will be $435 followed by $433. Preferred view is to look for gold prices to correct further towards the above-mentioned support levels and rise higher again.

Only a move below $427.50 will throw doubts on the sustenance of current up trend.

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. A negative divergence seen in RSI was another reason for the recent fall in prices this week. The averages in MACD are above the zero line of the indicator suggesting bullishness.

Only a crossover of the averages below the zero line of the indicator again will signify a reversal in trend. The short-term 8-day EMA is at $440.63 and the 34-day EMA is at $432.98.

Therefore, look for spot gold prices to test the support levels and rise higher again.

Supports are at $438, 435 and 433. Resistances are at $442, 445 and 448.

(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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