The Hindu Business Line : Gold may test support, rise

SPOT gold prices pulled back on a smart year-end rally as investors resisted taking profits, betting instead on a further rise as the year draws to a close. Spot gold prices shot higher against our near-term expectations, but fell in line with our long-term expectations. Once prices crossed the near-term resistance at $508, the momentum turned stronger, which has so far tested $518 and looks to edge higher further. Near-term support will now be at $507-08 and only a daily close below $501 will now rekindle hopes of bearishness in spot gold.

Strong resistance will now be seen at $521. Favoured view is now to look for support levels to hold for a rally higher. Risk of this view going wrong will be a sharp fall below $500.

As per our recent wave counts, we believe the current move to be an explosive third wave move ending at $541 followed by the fourth wave correction in progress. Though there are signs of the fifth wave to have begun, we will prefer to wait till some crucial resistances to be taken out. 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 to be intact. Only a cross-over of the averages below the zero line will signal bearishness again.

Prices are below the short-term 8-day EMA is at $507.35 indicating bullishness while the medium-term 34-day EMA is at $498.75. Therefore, look for spot gold prices to test the test the support levels and rise higher. Supports are at $507, 502 and 498. Resistances are at $521, 528 and 532.

(The author is in the advisory panel of Multi Commodity Exchange of India Ltd (MCX). The views expressed in this column are his own and not that of MCX. 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.)