The Hindu Business Line : Gold may test resistance level

Gold had lost 3 per cent from late last week going into Wednesday's session on fund selling across the metals complex, taking it to its cheapest since mid-September, before bargain hunting came in to offer support.

Spot gold prices moved lower against our expectations after failing to hold support at the key levels. Prices went below an important support at $460, but found good intermediate support at $458, rising higher from there. A possible head and shoulder pattern is seen, which is bearish in nature.

Failure to decisively go past $468 will be seen as bearish sign targeting the $455 level, a fibonnaci retracement point. Therefore, we will abandon our expectation of $490 till we see a clear move above $477. On the downside, $455 is an important support followed by $448.

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 have possibly ended at $480.63. A move below $448 will confirm this view and signal the beginning of a larger correction lower.

RSI is in the neutral zone indicating that it is neither overbought nor oversold. A minor positive divergence is seen where prices are making a lower low not confirmed a lower low in the indicators. The averages in MACD are still above the zero line of the indicator suggesting bullishness being intact overall. The short-term 8-day EMA is at $446.50 and the 34-day EMA is at $464.75.

Therefore, look for spot gold prices to test the resistance levels initially and then fall lower.

Supports are at $463, 458 and 455 . Resistances are at $468, 470 and 473.

(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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