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MCX Gold Technical Update

By: Chintan Karnani, Insignia Consultants

 -- Published: Tuesday, 6 May 2014 | Print  | Disqus 

I have often been asked why gold is unable to break past 30,000 rupees. Gold has been trading in a 27500-30700 range for the past few months. We try and look at various technical studies to assess where it is headed.

Gold - Fibonacci series


·         50% retracement at 29273 is the key resistance (30694-27852).

·         Only a daily close over 29273 for four consecutive days will resume another bullish rise to 30694.

·         Initial support is at 28523 and as long as gold trades over 28523, it will trade in a 28523-29273 range.

·         Long term bearish trend will be there if (a) Gold not break 30694 by end November 2014 (b) Gold has a daily close below 27852 for four consecutive days.

Gold and Moving averages


·         100 day moving average-29219

·         200 day moving average 29627

·         400 day moving average 29392

·         Unless gold breaks past 29220-29630 zone it will consolidate in a 28200-29220-29630 zone.

·         In the next two months either gold breaks 29627 or it will fall to 27852 (100% retracement 27852-30394) or even to 26800.

·         Moving averages give us a long term direction view and also break out points. However moving averages are an ineffective technical analysis tool when there is a consolidation phase.


Indian demand: Any stable government formed at the centre will result in either (a) custom duty being reduced on gold (b) Measures will be taken to increase official gold imports. Either way physical gold premiums will come down in India. Physical gold demand will zoom. July to September is a cyclical period of low gold demand in India. In case gold prices fall in India between the July and September period then cyclicals will be dumped and Indian gold demand will zoom. In my view any sustained gold price fall to 28800 (if any) and below will attract one and all in India.

Indian rupee performance against the US dollar: In 2013, rupee depreciation has been the key reason for the gold price rise in India (apart from higher custom duties and later banning gold import and later 80:20 rule). There is general consensus in India that any stable government formed at the centre and which has the potential to complete a full five year term will result in the rupee gaining back to 50.00 and below in the next twelve months (current price is 60.1550).

The rupee will be the key. A stronger rupee will prevent a big rise in Indian gold prices. Traders and investors who are long in MCX gold futures and/or have invested in physical gold should think hedging rupee in currency futures market but after 19th May, once election results are fairly known.


Chintan Karnani

Disclaimer: Any opinions as to the commentary, market information, and future direction of prices of specific currencies, metals and commodities reflect the views of the individual analyst, In no event shall Insignia Consultants or its employees have any liability for any losses incurred in connection with any decision made, action or inaction taken by any party in reliance upon the information provided in this material; or in any delays, inaccuracies, errors in, or omissions of Information. Nothing in this article is, or should be construed as, investment advice. Website

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