Gnanasekaar T

Gold to test resistance, slide

Updated on: Sep 04, 2011
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Comex gold ended sharply higher on Friday, as investors sought refuge in safe-haven assets following a bleak US employment report. US employment growth ground to a halt in August. Jobs creation in July and June were trimmed by a total of 58,000 jobs, and the unemployment rate stood at 9.1 per cent.

The report increased the odds of more stimulus from the Federal Reserve when it meets on Sept. 20-21, also a positive for bullion.

Markets viewed the lack of jobs growth in August as a sign the world's largest economy may be heading back into recession, heightening demand for gold.

Comex gold futures rose higher against our expectations. Trying to pick a top in gold has been the most challenging job for a chartist over the years. A decisive top has been so elusive.

Every time a top has been established, prices have broken it subsequently with further vigour which only indicates the strong underlying trend in progress. Daily close above $1,885 has opened the upside for push higher towards $1,950 on the upside or even higher towards the psychological $2,000-mark. Dips to $1,845-50 could hold supports now. Only a direct fall below $1,813 will confirm that a corrective decline has begun.

The wave counts have to be revisited again as a possible fifth could be in the making again. Potential targets for the fifth wave have already been met. Prices have gone above $1,900 as an extension of the fifth wave. As of now we feel the fifth wave move has ended.

However, a confirmation can be seen only below $1,600.Till then we stick to the continuance of the fifth wave. RSI is still in the neutral zone now indicating that it is neither overbought nor oversold.

The averages in MACD are still above the zero line of the indicator hinting at bullishness to be intact. Only a cross-over below the zero line in the indicator again will signal the resumption of bearish trend.

Therefore, look for gold futures to test the resistance levels and then fall lower again.

Supports are at $1,865, $1,845 and $1,815. Resistances are at $1,898, $1,920 and $1,950.

(The author is the Director of Commtrendz Research and also 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. )

Published on September 04, 2011

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