GOLD SHORT TERM VIEW:
It is evident from the chart that if Gold crosses Red Resistance line marked as (5) & breaks 1750$
level on upside then it may be headed to 1880-1900$ levels in short term. On the Downside the risk is
bigger as Gold has already rallied so much in past 2 years, there are cluster of supports between
1600-1650$ levels and these are the following 4 reasons to support this view:
1) GREEN line ( marked as 1) - Falling trendline by joining the previous two intermediate lows is placed around
1650- 1655 levels which should act as a immediate support.
2) BLUE line ( markes as 2) - Rising trendline formed by joining imp lows made in Sept & Oct is also placed
around 1650 levels
3) 200 DEMA ( marked as 3) - Very important moving average ( reasons already given next to Moving Average )
is placed at 1625-1630 levels which should act as imp support on closing basis
Importance of 200 DEMA on daily charts: Gold has not broken this moving average since
last 2 & 1/2 years - (April 2009 - Dec 2011 ), it has gone below this moving average on
Intraday basis but never closed below it. One recent example is during the fall of September,
as you can see on charts when prices went below the RED line but closed way above it. So
if prices of Gold give a sustained daily close below this RED - danger line then expect a huge
long term trend change in the Yellow Metal.
4) PURPLE line ( marked as 4 ) - Rising trendline formed by joining imp lows made in July & Sept
is placed around 1600 levels
So 1600-1650 $ should act as an important support range for Gold which if gets broken then
Gold may be headed to 10-15% correction on downside which may take it to 1400-1450 levels
erasing some of the gains built up in last 2 years for this Precious Metal
LONG TERM VIEW ON GOLD - ON LOG SCALE
Gold has been trading in a long term channel since almost last 3 years as it is evident from this chart
on a Log scale ( Log scale takes into calculation percentage based moves and not absolute so
gives a better picture for long term trends.)
1) RED line - Formed by joining the major tops in past 3 years is indicative of the fact
that how Gold is moving precisely in a channel since last few years and even during
the Sept 2011 Euphoria it respected the RED line around 1900 and crashed from there
2) BLUE line - Formed by joining the major bottoms in past 3 years which are 7 in number as you can see on the chart.
It is currently placed at 1600 levels and Gold should not break this line to resume the uptrend
So the question is - Will it also be 8th time lucky for Gold and after taking support around
1600 levels, it will continue its march towards upper end of the widening channel
and register its lifetime highs. But if Gold closes below 1600 levels on weekly closing
basis then the overall long term bullish trend will be over and it may
head to 1450-1300 levels in coming months.. So 1600 on the downside
and 1750 on the upside are the levels to watchout for GOLD
Regards
Ankit
