Buy spot gold on dips to USD 1682: Goejit

Spot gold slightly eased and settled below $1700 an ounce, after testing a fresh six month high of 1712.91 an ounce yesterday. The European Central Bank has agreed a potentially unlimited bond-buying plan which subsides to the zone’s debt crisis but positive jobless figures from US put a lid on strong gains in bullion. Even the European Central Bank kept their rates unchanged at the policy meeting, the President Mario Draghi had announced an infinite bond purchase scheme to lower borrowing cost of debt laden countries. New strategies to prop up the economy pushed the Euro currency to its highest level since July that supported bullion. However, investors are wary while taking fresh positions ahead the key US Non farm payrolls data due later today. A lesser than expected job figures from US could reinforce chances of an imminent quantitative easing from the Federal Reserve. Economic stimulus from central banks probably raises inflation outlook and could benefit bullion due to its inflation hedge appeal. At the same time, investment demand for gold stays at a peak level with exchange-traded funds hit a record high of 72.1 million ounces yesterday. ETF demand raised more than 38 percent so far this year.

Despite yesterday’s steep rally, reactionary waves overshadowed the bullish attempts and dragged prices lower to $1688. Ideally, the support of $1680 should force a swing higher but extend of such a pullback is uncertain until $1720 gives away convincingly. Sustained traded above $1680 would be an evidence of resurgence of bargain hunting but drop below the same could dent such bullish outlook and take prices lower. However, it is mandatory to surpass the 200 days moving average support of $1640 for eliciting strong sell off. Fall below $1617 might be a cautious one seeing that the point seems as a trigger of reversal of current bullishness. For the day, an initial consolidation is anticipated again, but breaking any of the sides of the immediate blockades of $1712-1680 will be required for sustainable moves. RSI and Bollinger Bands are placed in overbought area; hence corrective selling cannot be ignored in the coming session. Oscillators are placed well above the zero line, but volumes remain steady.

Trading strategies: Buy on dips to USD 1682, target USD 1712, SL USD 1660. Buy above USD 1720, target USD 1753/1762.  SL below USD  1700.

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