Financial Daily from THE HINDU group of publications
Friday, Oct 07, 2005
Financial Daily from THE HINDU group of publications Friday, Oct 07, 2005 |
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Agri-Biz & Commodities
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Technical Analysis Spot gold may test support level Gnanasekar. T
US crude shed 2.6 per cent this week after the federal Government said it was ready to tap emergency fuel reserves again if needed to offset production losses from recent hurricanes. Gold has not strictly tracked the dollar in recent weeks but it has broken from inverse link to the currency, as factors like worries about inflation and geopolitical events took centre stage. However, markets will eagerly await the non-farm payroll numbers to determine the strength of the US economy after the recent hurricanes. Gold is vulnerable to profit taking in the short-term, but bigger picture still favours rise in prices. Prices are some way from its peak in the early 1980s when prices hit $850. Strong physical demand and inflationary worries is expected to underpin spot gold prices in the short-term. Spot gold prices are seen consolidating near the recent highs while being supported well at $458 on the downside. Unexpected move below $458 will trigger bearishness and prices could even test the important trend line support point at $456 subsequently. However, we do not favour this view and believe prices could find support at $458-460 levels and rise higher again. Good support will now be seen at $463 and as long as $455 caps the downside, spot gold prices could test the technical objective at $490 or even higher towards the psychological level at $500. As per our recent wave counts, the third wave ended at $458 followed by a fourth wave correction in the form of wave A to E, which ended at the recent low of $418 and the fifth wave appears to have begun from there. A move below $448 will diminish our bullish expectation and signal the beginning of a larger correction lower.
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. The short-term 8-day EMA is at $467 and the 34-day EMA is at $455.50. Therefore, look for spot gold prices to test the support levels and rise higher again. Supports are at $463, 458 and 456. Resistances are at $468.50, 473 and 475. (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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