The Hindu Business Line : Spot gold may rise higher

SPOT gold prices rose sharply higher hitting multi-year highs, helped by global inflationary fears and heightened concerns of geo-political uncertainty. Gold has diverged from its recent tight inverse relationship to the dollar as investment buying steadily pushed precious metals and copper in specific higher this year, and a currently weaker euro should not hold it back from new highs. Dwindling output not able to match robust demand is also seen a supportive factor for gold.

Spot gold prices, as result, have broken key resistance levels. After prices found support at the crucial $455 an ounce last week, resistances at $470-471 followed by $476, has triggered strong bullishness once again opening the doors for a test of $490 or even higher towards the psychological resistance at $500. Immediate resistance will be seen at $486-87 levels from where a correction lower is expected. Any corrective dips should be now used as an opportunity to position longs in spot gold.

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 looks to continue to be in motion after a fractal break $480.60. Possible fifth wave target now is at $490-91.

RSI is in the overbought zone indicating a correction lower to take place. The averages in MACD have gone above the zero line of the indicator suggesting a bullish reversal. Only a crossover of the averages below the zero line will signal bearishness again. Prices are above the short-term 8-day EMA is at $469.25 and the 34-day EMA is at $465.65 Therefore, look for spot gold prices to rise higher with intermediate corrections.

Supports are at $475, 471 and 468. Resistances are at $483, 487 and 491.

(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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