SPOT gold prices ended lower on Wednesday on profit-taking as the currency markets turned choppy. Huge speculative net-log position in COMEX had been overhanging on the market as well resulting in position adjustment. Markets will also have to watch out for Federal Reserve chief Alan Greenspan's speech on clues towards pursuing the current monetary policy.
Physical buying is expected to support spot gold at lower levels as demand from top consumer India is expected to pick up ahead of the festival season. Rising crude prices and a buoyant physical market are expected to support gold prices firmly.
Spot gold prices have held well at support levels and bounced higher. No change in view. Bigger picture looks quite bullish and as mentioned earlier the triangle pattern is bullish in nature and a break above the resistance point is expected to see gold prices rise higher towards the recent high at $458 or even higher.
Near-term resistance is at $440-42. Major support points to watch for will be $435 followed by $433.
Preferred view is to look for gold prices to hold support at the above-mentioned levels and rise higher again. Only a move below $427.50 will throw doubts on the sustenance of current up trend. As per our recent wave counts, the third wave ended at $458 followed by a fourth wave correction to $410 and the fifth wave appears to have begun from there.
A move below $421 will negate this count we have adopted recently. RSI is in the neutral zone indicating that it is neither overbought nor oversold.
The averages in MACD are above the zero line of the indicator suggesting bullishness. Only a crossover of the averages below the zero line of the indicator again will signify a reversal in trend.
The short-term 8-day EMA is at $438.95 and the 34-day EMA is at $434.50. Therefore, look for spot gold prices to test the support levels and rise higher again.
Supports are at $435, 433 & 431.50. Resistances are at $440, 442 & 448.
(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 firstname.lastname@example.org.)