Looking to invest in precious metals? Go for gold

Pushkaraj Sham KanitkarGEPL CapitalGold has remained in a long term bull market since it bottomed out in December 2015 at levels of INR 24740. The yellow metal has been forming higher tops and higher bottoms on the weekly charts since the above said bottom; which indicates that the medium term as well as the long term trend is intact & still UP.The bullion, met with bit of resistance at the INR 32450 mark in July 2016, after which it went down to a level of INR 29300 recently. Gold has halted and taken support near the 29300 mark, which corresponds to the 38.2% retracement of the earlier move from the lows of 24740 in December 2015 to the high made in July 2016 at 32455. A major support also exists at the 50% retracement mark at the 28600 levels.We expect the next leg to open on the upside & the yellow metal to inch towards the INR 31350 mark. A move past this resistance may even open the gates towards INR 32450 levels (which is the 52 week high).Hence, gold is not just a BUY at current levels, but as well on dips. It would remain in an uptrend, till the major support on the lower side at INR 27690 (61.8% retracement of the earlier upmove) is intact. The longer term bull market would be under threat, only below the aforesaid level. In the international market, gold is trading at $1267 which is close to the 200 DMA. It is interspaced with important levels of $ 1276 (200 Week MA), $1205 (100 Week MA) & $1232 (50 Week MA). Thus there is a good amount of support close by & we expect the prices to inch up towards the levels of $1300, followed by $1375 once it goes past this inflexion zone. On the international front, twin variables the dollar index and US FED’s decision on interest rate hike will play an important role, with both of them quiet interconnected. While Fed funds futures show the odds of a rise in December have climbed, investors are still plowing funds into gold-backed exchange-traded funds, with holdings at the highest in more than three years last week. The probability of a December hike is about 68 per cent, from 59 per cent at the start of the month. On the other hand, the dollar index has rallied from 92.50 to 98.50 in last 6 months, largely due to the weakness in Euro and GBP; culminating out of the Brexit. That brings it to near the sentimental 100 mark, which also happens to be the 52 week high. With an imminent overhang, there is a high likelihood of a correction setting in, in the dollar index, which would make the precious metal more expensive. This brings us to summarise that while the downside seems limited, the upside maybe helped by macro-economic & macro-technical factors. We thus suggest a strong buy in gold for the medium term.