Wishing you Happy Diwali and a happy and prosperous Samvat 2072. It has been a little while since I have posted anything and there cannot be a better occasion for writing about gold than today – Diwali day.  The gold price behaved in sync with my views featured in the earlier post. Felt it was topical to do an update on gold as price is setting up well for the next move. Have a look at the weekly chart below.

Price has been consolidating broadly in a trading range since the prior update. My expectation is that price would remain in this broad range of $1,070 – 1,190 for a while. Whenever price gets into a trading range, it means that the underlying instrument is either being accumulated or distributed. Taking into account the prior fall and the subsequent gentling-out of the slope of decline, I am inclined to believe that this trading range constitutes accumulation.

But, it would make sense to wait for further clue from volume action before concluding that this range is indeed accumulation. Typically, the volume should dry-up progressively as price drifts to and spends time near the lower end of the trading range at $1,070-$1,080. This would suggest that there is little selling interest near the lows and price could then try to rally up with slightest influx of demand.

Getting back to more traditional technical analysis, price has been moving in the blue trend channel for a while now. A breakout above the upper parallel of this channel would indicate that the downtrend is over for gold. Until then, expect price to either be range bound or drift lower.

Let’s switch to the daily time frame. Direct your attention to the Daily chart featured below.

The price has dropped to the medianline of the red pitchfork and there is a case for price to congest and start heading higher in the short term. The other possibility, per Pitchfork theory, is acceleration through the medianline and head down south. Going by the recent price behaviour I would bet on the “congest & short term rally”scenario.

Whichever way you dice it, while there are early green-shoots, there is hardly any conclusive evidence until now to suggest that the major downtrend is over for gold. Price at best can remain range-bound for a few weeks / months in the $1,070 – 1,190 range and a breakout past $1,250 (upper blue line in the weekly chart) would indicate that gold has embarked on a new uptrend.

Until then, just trade the range. A fall below the lower end of the range at $1,070 with higher volume would suggest that the recent trading range was just a distribution and price is headed for far lower levels. Let’s address this scenario on a conclusive break of $1,070.

From a short-term perspective, there is a case to expect a bounce to the upper end of the range at $1,190 – ish.

Disclaimer: This post is not meant to be a trading recommendation. I am not a Sebi-Registered Analyst and I do not trade in gold / gold futures.

Gold price was in news a couple of weeks ago when it cracked sharply. There has been enough said and written about the outlook for gold and I thought I should not be left behind and decided put some digital ink to use to pen my observations. Let’s begin with the monthly chart of gold.

Featured in the above chart is a set of action-reaction lines with the thick green line being the centreline. Price has reached the upper blue reaction line in September 2011 and has since been in a major downtrend. The price now is back at the green centreline and this line is acting as support thus far.

Let’s take a closer look at the monthly chart.

Notice how the price accelerated and then slowed down as it approached the major support in the monthly time frame. The twin support from the centreline and the shaded turquoise zone has resulted in the deceleration in price. If the turquoise shaded band in the monthly chart is breached, gold could then drop to the major balance line at $1,033.

Next up is the weekly chart with a few observations.

It is not surprising that the price has halted at the medianline of the downsloping blue andrews pitchfork. If there is a recovery in price, the level of $1,130 would be first hurdle for Gold. Time to take a closer look and direct your attention to the daily chart featured below.

Notice how price has respected the Blue Schiff Pitchfork. Price has been clustering near the lower parallel which also coincides with weekly and monthly supports detailed earlier. Given confluence of support, it is not surprising that the fall has decelerated.