Gold had given a good run up since last one year, when interest in the Equities had faded off. But now things could change and money could flow back into Equities after government wining trust back through a budget which was surely repairing our Fiscal targets. Two more fundamental reasons for Domestic Gold to witness sell-off are, appreciating rupee and sell-off in International gold. Equity markets around the world have seen a quick rally from almost 200 Weekly SMA and so alternative investment asset gold has to see a profit booking.
Technically as chart suggest, a wedge pattern breakout has been confirmed today at 29200 which is trigger level for Shorting gold. Indicators on the daily chart are also in overbought zone supporting the wedge breakout. Though Confirmation depends on todays closing but i would take a risk early considering cross market analysis.
Recommended Strategy: Sell Gold (CMP:29130) Tgt: 28000 SL: 29800
Gold had been the most under performing invest asset since last 4 years since it pinched to new high but in recent past it has outperformed all the equity markets with some quick short term gains. Today i finally managed to get some time to analyse asset from the longer term perspective and just caught hold of a channel on Monthly chart of USD Gold and we could notice that its perfectly trading in that channel since late 2013. Though the channel is downward sloping which means overall outlook is bearish and this is just a short covering, but look at the indicators. Indicators are highly oversold that too on monthly chart, and are their moving averages are emerging over the indicator. This gives me a bit bitter moment being a equity guy. It is usually believed that Equity and Gold are inversely related because in rest of the world, except india, its just considered as an alternative investment idea! So if the gold demand is increasing, it simple states that equity money is following to Gold worldwide. But still a long term reversal confirmation is AWAITED. As you all could notice in the chart, gold is approaching resistance on the channel which is at $1258 (100 Months moving average) while another strong resistance is just above it which is at $1300 (Fibonacci resistance and channel resistance). So for confirmed breakout on Gold and a confirmed sell-off in equity, range of $1258-1300 is crucial breakout. Only time has the say now…so lets wait and watch.