Financial Daily from THE HINDU group of publications
Friday, Sep 02, 2005
Financial Daily from THE HINDU group of publications Friday, Sep 02, 2005 |
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Agri-Biz & Commodities
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Technical Analysis Industry & Economy - Precious Metals Gold may test support level Gnanasekar. T
SPOT gold prices rose from a one-month low to end higher on Wednesday, as the dollar fell lower against the major currencies. News of Chicago PMI contracting lower to 49.2 in August against 63.5 in July gave precious metals a boost as the dollar turned lower. COMEX gold futures tumbled lower on fund liquidation depressing spot gold prices in turn. The net fund long exposure rose to 159,687 contracts in the week ended August 23, was a record high position, compared with the previous record net long at 157,607 lots on August 16, according to Commitments of Traders data from the CFTC. As anticipated, physical buying support is strong on the back of festival season demand in India and this will be a supportive factor for precious metals in the weeks to come. Spot gold prices pulled back higher after testing the crucial support below $430. Break below important support at $435.70 triggered a fall lower. Near-term resistance is at $438-40. Price structures are not conducive for bullishness at present levels, and a failure to close above the above mentioned near-term resistance level could have bearish implications on spot gold, which has the potential to go as low as $427. The 200-day EMA is at $427.50 and this level is expected to hold gold prices strongly. Failure to do so would result in a further fall lower towards $423. 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 still 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 $438.95 and the 34-day EMA is at $436.35. Therefore, look for spot gold prices to test the support levels. Supports are at $433, 430.25 and 427.50. Resistances are at $438, 440.50 and 442.
(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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