Technical analysis of Gold

Gold as on 22 Feb'13 - USD 1581

Gold as on 22 Feb’13 – USD 1581

In the International market Gold is falling due to variety of reasons, there are much strong fundamental news flowing around, but I would like to draw your attention towards some simple technical observations.

As you can see in above attached chart that, Gold is falling in a channel line from beginning of Oct’12, and in last week only it gave sharp dip below lower channel line, which was indicative of strong selling pressure (I would not discuss any fundamental news attached). Channel has validated its authenticity in past, so if prices moves again in the channel line, than it is one signal where we can go long in Gold, but you can’t expect prices to touch upper channel line this time.

Secondly, momentum oscillator RSI (14) has reached historical low of 20, I have marked with red circle in chart. By this, please don’t expect bounce in prices, as prices have tested oversold territory, No. In past very few time RSI has tested this level in Gold chart, and whenever it has tested this level, prices consolidated and moved slightly lower. Confused, let me clear. From here on, prices may consolidate further and it is possible that after normalizing momentum we might see one more dip in price, but such dip should be utilized as a buying opportunity, by looking at divergence between Price and RSI, I hope I made it very clear. You have to keep little patience here to grab right opportunity.

Few of my friends must be betting that prices will retest its low of USD 1527 made in May’12, but does it make any difference, whether prices test this level or not, major damage is already done.  This time prices made a low of USD 1555.

I would not recommend to place stop loss below this level and take a long position, although it looks good, but I sense that we might see one more dip in price, and that should be utilized, by looking at price pattern at that point in time. Yes, aggressive traders can take minor longs as and when prices move above this channel line, which is coming near USD 1590 (prices should give close above this level and stay).

Lastly, on broad level, I don’t expect Gold to ride further and even testing its Major High near USD 1930.  Gold has shifted its range, expect it to stay consolidate to weak.

I welcome all your feedback and suggestions.


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