GOLD REPORT (16TH JULY 2012)
Gold demand as a safe haven investment has been lost from last some month, as it behaving like a riskier asset. It’s very tough to understand whether it going to behave like a riskier asset or safe-haven investment. In September 2011 it made a high of $1923/ounce on COMEX over the news of increasing Euro Zone debt crisis but now a day its similarly trading with Euro currency and fall with every down move in Euro. Every economical news and data mostly that is released from U.S. Europe and China makes effect over gold trading and its direction, and after having a either side move in gold we get news that gold behaved like a safe-haven investment or riskier asset or it is assumed that U.S. Fed may go for QE3 and by then that move is finish. The other thing about the gold that is it always trade inversely of Dollar index (a basket of six major currency trades against Dollar). When Dollar index fall gold run and vice versa.
When we talk about gold trading in Indian market on MCX, it becomes tougher to understand the trend compare to international gold because of the effect of Rupees trading against Dollar. Depreciating Rupees value against Dollar always makes gold bullish and appreciating Rupees value against Dollar always makes gold bearish in Indian market, at the same time movement in International gold doesn’t affect gold movement in Indian market. From Feb. 2012 to end of June, Rupees has depreciated around 19% against Dollar because of this, gold in Indian market trading in its high range of 29000-30000 Rs. Per 10gm when International gold trading $1590 around 21% down from its all-time high of $1923 made in Sep. 2011.
To trade in gold we need to understand a blend of fundamental and technical analysis. To have a clear directional move, we need to have a supportive fundamental and technical to each other; otherwise price will not make a big move and keep on moving in a range.
In International market gold weekly closing on Friday 13th June is $1589/ounce, $6 up compare to past week closing. Gold traded down throughout the week but started jumping on Friday morning as data released from China that China’s economic expansion slowed for a six quarter, growing at 7.6% in the second quarter, raised hope for quantitative easing from China’s Government to boost its economy. In evening gold price got a shot in the arm when data released from U.S. that Consumer Sentiment Index fell in early July to its lowest level in seven months to 72.0 from 73.2 in June leaving the door open for more easing by U.S. Federal Reserve.
In Indian market on MCX gold weekly closing is 29272 Rs/10gm, around 1.2% down compare to last week closing of 29621, it happened just because of appreciating Rupees values against Dollar by 0.37 Rupees compare to last week.
In the coming week starts from 16th July, we need to take a serious look over some fundamental news and released data that will pave the way for gold price movement. That is……
- Retails sales and Empire State manufacturing survey on Monday from U.S.
- Consumer Price Index and Industrial production on Tuesday from U.S.
- U.S. Federal Reserve chairmen Ben Bernanke is scheduled to appear before a pair of congressional panels Tuesday and Wednesday morning to testify on the economy.
- Data for Housing Starts on Wednesday from U.S.
- Weekly Jobless Claims on Thursday from U.S.
In Indian market Rupees movement will be on watch, further appreciation below 55 in Rupees value against Dollar may hurt gold bullish trader.
Here we are providing some Indian gold trading chart with technical analysis that will help us to trade in gold in the coming week.
Given chart 1 providing a picture of gold trading daily candle chart from mid May 2012 to last Saturday closing. Weekly closing on 14th of July on MCX gold closed Rs. 29272/10gm. During the week price has slipped well below of 50 days EMA (a blue line moving above the prices at the right hand side of the chart) but took a support of 100 days EMA (a red line moving just below the prices at the right hand side of the chart). The time when price slipped well below of 50 days EMA, before that it crossed a neckline of bearish H&S PATTERN (a green trend line in the chart) at the level of 29539.
After making a high of 30428 on 19th June 2012 prices are continuing slipping down into a downward channel mode (yellow channel lines). The channel has become a trend setter as prices have touched its upper line three time and down line two times and may try to touch down line third time but the100 days EMA may provide some support for a while.
Lower window of the chart showing RSI level (yellow line in the chart) that is around 35, has come up from the over sought range of 30 but still we are waiting to come above the level of 50 or above the given green trend line to become a bullish.
Given chart 2 presenting gold weekly candle chart since April 2011 to last Saturday closing. Since September 2011 to June 2012 prices have been making higher high and lower low that is very much evident with the help of given green trend line channel but on the other side OBV (given purple color line with prices) continuously making lower high and lower low and moving in between of blue trend line downward moving channel. This situation is called a NEGETIVE DIVERGENCE sooner it will bring price more down for new low around the level of given green channel line support.
RECOMMENDATION- On the basis of fundamental analysis as lots of data about to come, we assume more volatility in the market but technical analysis gives us bearish signal. A range from 29420-29488 create a resistance; we recommend to sell from these levels to the target of 29141 and 28917. If price close above 29490 on daily basis then make buy position to the level of 29645 and 29795.