The Hindu Business Line : Gold may test support level

SPOT gold prices corrected sharply lower following a sell-off by investment funds that toppled everything from gold to oil to agri-commodities from their lofty prices.

Spot gold prices corrected lower after showing exhaustion and lack of follow-through at higher levels. As expected, a daily close below $561-62 signalled the beginning of a deeper correction. This level could prove to be a tough resistance to cross in the near-term. However, an unexpected close above $567-68 would hint at resumption in the up trend targeting $590 levels.

Our favoured view presently is to expect resistance to be strong at $562 levels and prices to correct further lower towards the trend line support point at $534-35 levels.

As per our recent wave counts, we believe the current third wave to have ended at $575, provided this high is not taken out in the coming sessions. A corrective fourth wave move is expected with elliot targets at $530 levels. 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 period EMA at $561 an indication of short-term bearishness followed by the 34-day period EMA at $545. Therefore, look for spot gold prices to test the support levels in the coming sessions.

Supports are at $545, 539 and 534. Resistances are at $561, 565 and 571.

(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.)

Gnanasekar. T

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