US Gold Futures to Face Resistance at $1810, MCX 29,450

Gold prices advanced with immense strength this week, buttressed by Chinese monetary easing and an eventual Greece bailout.

China’s central bank (People’s Bank of China) has cut the bank’s reserve requirement rate in order to enhance liquidity and stimulate growth. On Greece front, EU finance ministers have provided a 130bn euro (US$172 billion) bailout to Greece in order to avoid a messy default next month.

Private bondholders have agreed to take deeper losses, about 53.5% haircut on their holdings. This accord will help in reducing Greek debt from currently 165% of the Gross Domestic Product to 120% of by 2020.

On currency front, Euro remains supported by reports that European Central Bank will lend nearly half a trillion euros to banks at ultra-low rates through its 3 year refinancing operation scheduled next week.

Escalating geopolitical uncertainty in regard with the rift between Iran and Western nations has buoyed the buying sentiment in the complex.

Multitude of factors, including resurgence in Euro, geopolitical uncertainty and improving investor sentiment will continue to benefit the bulls for the next couple of weeks.

Gold prices can retest the US$1,850-1,880 range, while not ruling out the possibility of US$1,920 in the medium to long term.

Technically, following the steady rise from the low of US$1,530 and the eventual break of US$1,650- 1,700, chart is reflecting a positive momentum. Recently, prices have taken good support at US$1,710- 2,000 and gave a breakout above the short term trend line as well.

The price formation from Sep’11 to Jan’12 has given rise to a potential bullish formation whose target is placed at US$1,880.

Prices could face initial resistance at US$1,810 subsequent to which upward momentum towards the above mentioned target should commence.

As far as MCX gold is concerned, prices have been contained within a medium term channel since Oct’11 and have exhibited strong support and bounce back from Rs26,500 and Rs28,000.

This paves way for an extended bull leg towards the upper trend line of the channel at Rs30,300. Prices could face initial resistance around Rs29,450 before gathering steam to turn up.

As long as prices do not close below Rs27,300, the above mentioned positive outlook stands intact.