Gold- Thumbs Down

Fundamental on gold

Gold prices lost steam in the previous month after the FOMC announced a third $10 billion slash in quantitative easing, bringing down its monthly bond purchases to $55 billion. Gold prices had a knee-jerk reaction after Fed Chair, Janet Yellen said the Fed would probably end its bullion friendly bond-buying programme this autumn, and could start pushing interest rates higher around six months later. The US non-farm payrolls grew up to 175,000 against market forecast of 149,000 in February. In the previous month,the figure was 129,000. China’s first domestic bond default wobbled the foundations of financial market and hit investors’ interest, hurting demand from the world’s largest bullion consumer. China Gold Association said that Chinese demand might fall by 17% YoY in second quarter of 2014.

The Euro weakened after data that showed that growth in Germany slackened in March, raising the potential for more monetary easing from the European Central Bank. Data from the Eurozone as a whole plunged compared with February. Earlier during the month, gold prices reached near six-month highs, on persistent, political tensions between Russia and the West over Ukraine along with the ongoing worries of economic slowdown in China. Sanctions by G-8 countries over Russia ignited speculations of serious supply crunch for the yellow metal, which may hit the market as Russia is among the top five gold producing nations in the world. Indian gold imports fell by more than70% in the final quarter of 2013 from 255 tonnes in the year-ago period and are expected to be half the usual levels at 500-550 tonnes in 2014, if new import rules are maintained, a top trade body official said. Furthermore, India’s Finance Minister, P. Chidambaram indicated that curbs could be revisited only after the final current account deficit numbers, which are expected to be published early June.

CFTC Gold Report

Market traders in large futures cut back on their overall bullish hedges in gold futures last week, according to the latest Commitment of Traders (COT) data released by the Commodity Futures Trading Commission (CFTC) on March28.

The non-commercial futures contracts of Comex gold futures, traded by large speculators and hedge funds, totaled a net position of 117,317 contracts in the data reported for March 25. This was a change of -19,497 contracts from the previous week’s total of 136,814 net contracts recorded on March 18.

The previous week’s total on March 18 had been the highest level of gold net positions since February 5, 2013, when large speculators’ positions equaled 137,465 contracts.

Over the weekly reporting period from Tuesday, March 18 to Tuesday, March 25, price of gold fell from approximately $1,359.00 to $1,311.00 per ounce, according to gold price data from the MarketWatch.

Last 6 Weeks of Large Trader Non-Commercial Positions

 Technical on Gold

The above figureis of a gold daily chart. It has broken major support of Rs 28200/10grms on MCX division. RSI Indicator was diverging the latest uptrend in the price. MACD Indicator has moved below the centered line. As per the channel, drawn Gold prices may find support at Rs 25500-25000 in the short term where it will touch the lower channel line.

International Spot Gold weekly chart

International Spot Gold weekly chart

International gold failed to move above $1430. It may find support at $1180.

Atthe MCX level, strengthening rupee has helped keep gold price under pressure. RSI has broken the 45 support level. MACD indicator is going to break the centered line. Indicator suggests weakness in prices.

Elliott Wave Count on Gold Weekly Chart:

A major analyst said that the Bull Run of gold is over. Therefore, we may assume that 32450 level in Nov 2012 was the last Bull Run high and after that, correction has started.

As per my Wave count, labels a, b, c in red suggests Corrective Expanded Flat of the Elliott wave principle. As per the Wave count and price extension, price should go up to minimum of Rs 25538 (123.6%) and Rs 22580(161.8%), with the time horizon of next 6-8 months. To conclude, technically, we can say “GOLD THUMBS DOWN”.

Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.

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  • Nice article.. Thanks for sharing the same

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