By Bhavik Patel
Gold had declined by around $63 this week where in the COMEX Spot, it managed to breach its important psychological support of $1900. Next support emerges around $1850-$1835. We believe gold is near to its support zone as the USD has started declining. The rally in USD started after the Fed kept the tone hawkish and the dot plan suggested 2 rate cut next year instead of expectation of 4.
Although silver had witnessed short covering, gold still has not seen any short covering. We believe once gold breached its level of $1900 on the downside, longs got unwinded and short got added which explains why gold was down yesterday despite Dollar index weakening. So clearly yesterday’s weakness in gold cannot be attributed to the Dollar.
Looking at the risk/reward ratio, it seems more rewarding to go on the long side as we have already seen four consecutive negative trading sessions for gold. Momentum oscillator RSI_14 shows gold in the oversold region as it is near 30 levels and historically we have seen gold bouncing whenever RSI_14 is near 30 levels. So expect some bounce back from the current region. On the upside, 58300-58500 seems to be the immediate target and on the downside 57300 seems to be the support. So one can go long at current market price for an expected target of 58500 and stoploss of 57300.
(Bhavik Patel is a commodity and currency analyst at Tradebull Securities. Views expressed are the author’s own. Please consult your financial advisor before investing.)
