Financial Daily from THE HINDU group of publications
Friday, Jan 21, 2005
Financial Daily from THE HINDU group of publications Friday, Jan 21, 2005 |
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Agri-Biz & Commodities
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Technical Analysis Spot gold may head higher Gnanasekar.T
SPOT gold prices are stuck in a range waiting for a clear direction. Dollar continues to strengthen on the back of good economic numbers released till now suggesting further interest rate hikes. A firmer dollar usually pressures gold. Dollar looks to strengthen against the major currencies. In the short-term, however, markets will turn aggressively bullish only after seeing a clear improvement in the deficits. Despite the dollar's wild swings this year, we can expect the currency's weak trend to remain intact and that should propel precious metal prices higher in 2005. Oil prices climbing back to the psychological $50 per barrel can have a positive effect on gold. Iraqi elections and fear of disruptions by terrorists can also help underpin precious metals/oil prices. There are still plenty of reasons to buy gold with uncertainty about the outlook for the US economy, overall dollar weakness and demand growing from the launch of U.S. exchange-traded funds. Current fall in prices could be the ideal opportunity. Spot gold prices are trading in a range with support at $421-422 and resistance at $427-428. Break of this range either side will provide clues on near-term direction. Favoured view is to look for support at $420-421 to hold and test the near-term resistance at $431-32, which happens to be the falling channel resistance point as seen in the chart above. Only a daily close below $419.25 will negate our bullish outlook for the coming week. Resumption of the bullish trend can, however, be confirmed only after a daily close above $435. As per our recent wave counts, the third wave ended at $433 followed by a fourth wave correction to $371 and the current move as a fifth wave as it shows characteristics of an impulse wave. Current fall to $417 is possibly the corrective sub-wave of the fifth wave impulse we are currently in. RSI is in the oversold zone now indicating a pullback to take place. The averages in MACD are below the zero line of the indicator suggesting bearishness. Only a crossover of the averages above the zero line in the indicator will signal a clear bullish reversal. Prices are below the short-term 9-day EMA at $424.47 and the medium term 25-day EMA is at $429.73. Therefore, look for prices to test the support levels and subsequently head higher. Supports are at $420.25, 418 and 415. Resistances at $ 425, 428.50 and 433 respectively.
(The author is associated with the Multi Commodity Exchange of India Ltd. (MCX). The views expressed in this column are his own and not that of his emploeyer. 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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