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Gold is in overbought zone, trade cautiously: Bhavik Patel of Tradebulls

Gold's next move is expected on Friday when the US Labor Department releases its non-farm payrolls report for May

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commodity trading | Markets | Market technicals

Bhavik Patel  |  Mumbai 



Gold
Anything above 70 level is considered overbought

Gold has dropped below $1900. Now, although dollar weakness contributed fractional tailwinds, it was not enough for gold to close positive on Tuesday. Despite a minor pullback, gold bulls are near technical advantage. A two-month-old price uptrend is in place on the daily bar chart and next resistance for gold comes around $1959, a level last seen in December 2020. Meanwhile, immediate support for gold in COMEX is at $1885.

Gold’s next move is expected on Friday when the US Labor Department releases its non-farm payrolls report for May. A disappointing non-farm payroll could push further upside while better than expected number could see US dollar and yields pivot higher. Hedge funds and investors have covered their short positions and have added long as speculative interest in gold has risen for four consecutive weeks.

Some caution is needed as momentum oscillator RSI_14 is now in overbought zone around 75. Anything above 70 level is considered overbought, so long positions should be held with strict stoploss. In MCX, prices are still above its 200-day moving average and we recommend taking some profit off the table as gold in COMEX is trading in overbought zone while in MCX, Gold prices, due to strong rupee (it underperformed compared to COMEX), has just entered overbought zone. There would be opportunity to go long around 48,800 with stoploss of 48,200. Wait for some decline before taking fresh long positions but underlying trend still remains positive.

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First Published: Thu, June 03 2021. 08:50 IST

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