Market Update
Despite the strong close on Monday above the 100 and 200 day moving averages, it appeared to be nothing more than a fake out as gold’s inability to break through the more significant resistance at the figure of $1,700 caused traders to shift their short term bias to the downside. Gold now has three consecutive down days under its belt. With the 100 day moving average crossing below the 200 day moving average (generally a bearish technical signal) though, traders will be more inclined to play the market short. This is especially so given that it is quarter end. Near term support is coming in at the double bottom of $1,655 with looming resistance still remaining at the key level of $1,700. Should $1,655 break, next support for gold is at the previous low from last week of $1,628.
Many market participants are eagerly awaiting developments in India in relation to the import duty which was doubled from 2% to 4%. Bullion strikes there have entered their 12th day as traders, jewelers, and dealers have protested against the government’s tax imposition. With gold being such an important part of India’s culture as well as economy, it is hard not to envisage some sort of consolation or compromise on the government’s behalf in this situation. Any sort of alleviation or repeal to the import duty should be closely watched and could lead to a short term spike in gold.
