Commodity Bullions : Next Week Outlook

Gold prices were firm during initial part of the week, but later slid from weekly highs as a result of profit booking amid dollar reversing its earlier losses. The next week will see some crucial data releases in the form GDP data from the UK and US, durable goods orders, existing home sales and new home sales from the Thursday U.S. Except durable goods orders, most of the data are showing positive expectations and thus, may prove to be and thus, may prove to be positive for the U.S. dollar. Personal income and personal spending are expected to rise further while U. Of Michigan Confidence also improves. In addition, the Fed is committed to buying government bonds as a part of $600 billion bond purchase program. We expect the dollar index to see further gains during the next week. Stronger dollar may put some pressure on the bullion prices. However, on the other hand, there are some factors which may support the yellow metal. As European sovereign debt concerns continue to mount, gold and silver are likely to remain in high demand as investors look to diversify away from their euro's (fiat money) in search of tangible currency alternatives. Moody has placed Greece and Spain’s rating under review for possible downgrade earlier this week. This may result in both gold and the dollar moving in same tandem which may seem strange but seem increasingly likely. Overall, gold may trade sideways as both positive and negative factors could be noticed in 

Technical Analysis – 

Gold Bullion prices took correction in line with our expectations last week. Going forward, gold’s weekly chart shows a “Doji” candle stick with long upper shadow emerging after a black candle stick which suggests end of the correction mode. The line tool study of Fibonacci principle suggests that the prices failed to close below the $1368 i.e. 23.6% retracement of the range $1162.50 to $1432, indicating that the trend is still strong. The level $1368 is also important as it is a support level for the long term Red color trend line drawn by joining 2 well defined troughs in the chart shown below. As per Japanese technical indicator Ichimoku Kinko Hyo, there is a strong support at $1374 as the two lines (i.e. Tenkan-San (9) and Chikou Span (Lagging Span) (26)) out of five are falling exactly at this level. (Note: The level $1374 is the closing price of this week). The RSI (14) is treading at 0.63 levels, suggesting down side mode for coming week. From the above analysis, we expect gold prices to remain sideways with upside biased and therefore, suggest low risk traders to stay out of the market and high risk traders can buy gold on support levels for limited targets with strict stop losses.