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You are here : IndiaNotes >> Market Action >> Commodities >> Gold [Sona]

Technical View: Gold

MoneyWorks4me.com | 14 Dec, 2014  | Follow Author | Add to my Favourites 
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International Gold has given a downward breakdown from the “Descending Triangle Pattern”. Descending triangle is a bearish chart pattern used in technical analysis that is created by drawing one trendline that connects a series of lower highs and a second trendline that has historically proven to be a strong level of support. It clearly shows that the demand for an asset is weakening, and when the price breaks below the lower support, it is a clear indication that downside momentum is likely to continue or become stronger. Ideally after this breakdown, Gold should have gone to $1000/$1020 levels.


However, post breakout there was no follow-up action on the downside. We have seen a “Hammer”. As the name says whenever a hammer appears especially after a significant downtrend it means that the price is bottoming. Soon after “Hammer” Candle we have seen “Bullish Engulfing” candle appearing on the charts. Owing to this technical set-up we believe price could again rise to $1260 and then $1300 levels in the short term.

 


As far as long term view on gold is concerned, we are in the midst of secular bear run in commodities. As a matter of fact, the last bear run in gold lasted for 15 to 18 years and lost 2/3rd of its value. The great gold bull run of 2001-2011 which took gold from $250 to $1900 was over in 2011 itself. Since then we have been in the bearish cycle. We are not saying that this bear run will also run for 15 to 18 years, but one thing we can surely say that we are not going to be out of woods soon. This bearish cycle on a very conservative basis should last for 10 years starting 2011 i.e. to 2021. Also we think that gold will fall to triple digits below $ 1000 at least once within this bearish cycle.


So to sum it up – by conservative estimates and taking into consideration Technical Analysis we should see gold not giving positive returns till 2021. Within this timeframe, we will see gold faling below $1000 at least once. Our aggressive targets are – gold not moving up till 2024 and prices touching as low as $800 based on individual standalone chart of gold and taking into consideration 16/18 year Dow Cycle.

 


International Gold had made a “Shooting Star” bearish reversal pattern at 34500/35000 levels and since then has been in the Bear run. RSI has not moved above 60 levels on weekly charts which suggest sellers are aggressive on every rallies. The Domestic gold has been taking resistance at the downward sloping trendline. The Technical target on account of these parameters comes close to 22600/23200 levels in MCX gold. Incase gold comes to 22600/23200 levels we can buy for a short move upto 25500 levels. However our larger degree view from 5-7 years perspective is that gold could give returns less inflation.




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Disclaimer: The author has taken due care and caution to compile and analyse the data. The opinions expressed above are only the views of the author, and not a recommendation to buy or sell. The author does not accept any liability whatsoever arising from the use of any of the above contents.




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