Buy spot gold on dips to USD 1718; SL USD 1700: Geojit

Spot gold ticked lower after surging more than 3 percent in the last week as traders remained vigilant ahead of the key US Fed policy meeting later the week. Expectations of another round of quantitative easing from US Federal Reserve and possible European bond buying program have pushed gold to multi month high levels earlier. Last week’s feeble US employment numbers has embarked upon likelihood of stimulus measures from Federal Reserve. Non-farm payrolls increased to only 96000 last month against the expectations of 125000 new jobs last month. Meanwhile, tomorrow’s German court ruling on whether they need to contribute to the European rescue fund would be another trigger to pave way for fresh directions of bullion. Monetary stimulus measures always benefited gold due to its inflation hedge appeal. Investment demands for gold have been surging recently with the holdings of gold exchange traded fund rising to record peak levels yesterday. As per latest CFTC data, speculators increased their bullish bets in gold futures and options to its highest level in more than 6 months. However, physical activities from Asia remained steady while scrap gold continued to flow in to the market.

After posting handsome gains in the last few trading sessions, prices corrected lower but are still above the psychological mark of $1700 an ounce. Prices halted just below the minor upside obstacle of $1742 and slightly pushed down. Even as the broad trend remains on the positive side, recent run looks exhausted and required few more corrective selling probably till $1710. Inability to move past $1700 would be an ideal level for entering long positions towards a target of $1742/1762, followed by $1800 levels. Liquidation pressure is least expected to break $1688 where the recent consolidation swing support is placed. However, reversal of the current bullish view is favored only on a close below the 200 day moving average support of $1642. The bullish crossover in the MACD is supportive for extending bull run but the overbought condition in Bollinger Band and RSI is opening chances of counteractive sell off later. Volume seen strengthening compared to last few trading sessions.

Trading strategies for spot gold:

Buy on dips to USD 1718, target USD 1742, SL below USD 1700.

Buy on dips to USD 1682, target USD 1712, SL USD 1660.

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