GOLD WEEKLY REPORT (2ND – 7TH JULY 2012)

Blast in the gold prices on Friday 29th June was a reaction of the outcome of a marathon meeting in Brussels. European leaders of 17 nations agreed over some key issues just to defuse the bomb of debt crisis. They all have agreed over 120 billion euro growth package to bring euro zone growth on track and they also proposed to create a single supervisory mechanism involving with European Central Bank that will make fund available to lend banks directly for recapitalization.

Monetary stimulus by central banks and governments make the probability to depreciate currency and increase inflation rate due to this loss of purchasing power. Hedge fund managers and institutional investor buy gold to hedge against these all losses. On Friday international gold prices surged 3.7% and closed around $1600 per ounce but the same run was not seen with MCX gold prices because of the increasing value of rupees against Dollar.

Some analyst still believes that the European agreement is little more than a temporary patch-up and they suspect the sustainability of Friday’s rally to last long.

Sales of the U.S. Mint’s American Eagle Gold coins fell more than 50 percent year-on-year to 127,500 ounces in the second quarter, their worst three months since the second quarter of 2008.

Action to be watched in the week starts from 2nd of July—ECB is expected to lower the main re-financing rate on Thursday, Bank of England would also likely approve further QE measures, RBA meeting on Tuesday, Japan’s June Tankan survey, the US June employment report and PMI data from various countries.

TECHNICAL ANALYSIS

We are analyzing here MCX gold prices with some technical point of view. The first crucial thing while trading MCX gold is always keeps a close watch over rupees v/s Dollar trading. On MCX gold price closed 29665 Rs. on last Saturday 1.03% lower than last week.

Chart 1 is a daily candle chart showing trading from 19th April to 2nd July Monday morning. 2nd July Monday morning prices are trading around 29700 below the 23.6% retracement (from the low of 27855 on 16th May 2012 to the high of 30428 on 19th June 2012). On Friday price touched 38.2% retracement level that is 29445 and took support. The blue line in the chart with price is 50 days EMA, coincidently around the 38.2% retracement level, in this way that becomes very solid support. The red line in the chart with price is a neckline of a very absurd bearish H&S PATTERN that has been broken on Friday. Lower window of the chart with green line that is showing RSI moving in the sell zone, label is around 37.

In the chart 2 that is weekly gold trading chart, prices have closed 29665 well below the red upward moving trend line and after breaking this trend line we are expecting price to move in the range of the downward slanting yellow line channel, if this channel is broken either side on closely basis price will follow that direction.

RECOMMENDATION- Due to the last week rally, we may expect some more bounce in the gold price but that will not last long. We are expecting price move in the range of 29,450-30,000. Sell with every up move. 29450 is a very solid support if that is broken at closing basis then another support will be 29150.