From last few trading sessions we have seen pressure in Gold from last few trading session as Federal Reserve Chair Janet Yellen showing confidence in US economy. Gold prices have fallen below $1200 on Friday as the metal continues to lose ground to the broadly-stronger US Dollar. In the Asian session, the spot price per ounce stands at $1195, marking a three-week low. The US dollar gained about 100 points on Wednesday, boosted by a hawkish Fed policy statement. The Fed said that the labor market is strengthening and inflation remains on target, although it did note that the labor market participation rate remains low. As expected the Fed completed the taper of its QE3 program. The asset-purchase program was initially started in 2008, at the height of the economic crisis, in order to boost a weak US economy. The termination of the QE is a symbolic step which is a vote of confidence from the powerful Fed that the US economy is on the right track. From data front showed that the U.S. economy grew more than expected in the third quarter. The Commerce Department said gross domestic product grew at a seasonally adjusted annual rate of 3.5% in the three months ended September 30, above expectations for growth of 3%. Separate data showed that the number of individuals filing for initial jobless benefits increased by 3,000 last week to 287,000 from the previous week’s revised total of 284,000. Jobless claims have held below the 300,000-level for seven consecutive weeks, indicating that the recovery in the labor market is gaining momentum. Meanwhile, investors adjusted to a future without large scale asset purchases from the Federal Reserve. The U.S. central bank ended its monthly bond-buying program, known as quantitative easing, in a widely expected decision at the conclusion of its two-day policy meeting on Wednesday. The Fed retained its commitment to keep interest rates near zero for a “considerable time," but sounded more hawkish on the labor market, saying that “under utilization of labor resources is gradually diminishing.” Prior statements from the Fed described the slack in the jobs market as "significant." The US dollar index, which tracks the performance of the greenback against a basket of six major rivals, surged to a three-and-a-half-week high, as market players brought forward expectations of when the Fed would eventually raise rates. A stronger U.S. dollar usually weighs on gold, as it dampens the metal's appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies. On the other side, US durable goods looked dismal in September. Core Durable Goods Orders dropped 0.2%, its second decline in three months. This was well short of the estimate of 0.5%. Durable Goods Orders followed suit with a decline of -1.3%. This was a second straight decline, and missed the estimate of 0.4%. There was much better news from CB Consumer Confidence, as the indicator climbed to 94.5 points, up sharply from 86.0 points. This easily beat the estimate of 87.4 and marked a 7-year high. An increase in consumer confidence usually translates into stronger consumer spending, which is a critical component for economic growth.
Technically, Gold has support $1180 and resistance at $1220. Below $1193 will see panic till $1187---$1180. Three consecutive closes + weekly close below $1180 will see nonstop panic till $1153---$1141 in days to come. On Monthly chart, Gold is forming wedge pattern and monthly close below $1180 will take Gold to $1050---$980 in coming weeks. On other side, Dollar index is trading around 86.50. It has support at 84.80 while resistance at 86.80. Still it looks positive and could test its resistance. Close above 86.80 will see sharp upside rally till 91.00---93.50+ mark in days to come. Yellow metal almost traded inversely with dollar Index. Recovery in global markets will keep pressure in bullion markets.
On MCX division, Gold has support at 26300 and resistance at 26850---27200. Two consecutive closes below 26300 will take to 25700---25300 and then to 24800 mark in days to come. Traders can sell Gold on rise around 26850 with stop loss above 27200 on closing basis for the initial target of 26300. On Monthly chart, Gold has major support at 24800 level and resistance at 27650. Negative RSI on monthly and weekly chart is at 45 while daily stand at 50 which indicate that gold remain under pressure for time being and then consolidate at lower levels. Here, USDINR plays key volatility on MCX division. USDINR has support at 61.40---60.70 and resistance at 62.50. With seeing positive momentum in equity market along with lower crude oil prices will keep pressure on USD against INR and INR will appreciate in near terms. Below 61.40 will see panic in USDINR till 61.00---60.70. Three consecutive closes + weekly close below 60.70 will see free fall in USDINR till 59.80---59.30 mark in days to come and this helps to maintain pressure in commodity. Fresh buying can initiate only above 62.50 level. Chances are bright to move gold towards south direction until and unless any major news comes from developed economics. So at this stage, any sharp rise will be best selling opportunity in gold but trade with levels only.
Traders can sell Gold (MCX) around 26800---26850. Stop loss 27200. Target 26300
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