Financial Daily from THE HINDU group of publications
Friday, Jan 27, 2006
Financial Daily from THE HINDU group of publications Friday, Jan 27, 2006 |
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Agri-Biz & Commodities
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Technical Analysis Industry & Economy - Precious Metals Gold may correct lower Gnanasekar T.
SPOT gold prices stormed higher mostly on investment buying driven by concerns about West Asia tensions, higher energy prices, dollar instability and positive gold fundamentals. The other precious/industrial metal, silver gained sharply higher on talks of a silver exchange-traded fund potentially getting closer to approval. Once again, we see a base being formed at $551 level. Resistance is seen at $ 568 presently. Consolidation between $550- 565 levels is seen now, with a potential to break higher and test $575 levels or even higher towards $580, an important trend line resistance point. Unexpected move below $548 will be the first signal for a deeper correction lower towards $530. As per our recent wave counts, we believe the current move to be an explosive third wave move in progress. Only a fall below $538-40 will confirm the end of wave three and a fourth wave correction to have begun. RSI is in the neutral zone indicating that it is neither overbought nor oversold. Multiple negative divergences are seen in the indicator warning of an impending correction lower in the coming sessions. Therefore, though there are good signs of this up trend to continue, it is advisable to tread with caution on the buying side. The averages in MACD are still above the zero line of the indicator suggesting bullishness to be intact. Only a crossover of the averages below the zero line will signal bearishness again. Prices have also closed above the short-term 8-day period EMA at $556 followed by the 34-day period EMA at $532. Therefore, look for spot gold prices to test the resistance levels and, subsequently, correct lower. Supports are at $556, $548 and $540. Resistances are at $568, $571 and $575.
(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.)
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