According to Reuters, the Indian rupee staged a sharp recovery last Wednesday after suspected heavy dollar selling by the central bank, preventing the battered currency from slipping to a record low on the same day that the authority ushered in a new governor.
Raghuram Rajan, a former chief economist at the International Monetary Fund (IMF), took charge at the Reserve Bank of India as the country faces its worst economic crunch since a balance of payments crisis two decades ago.
The country is grappling with a record current account deficit and a hefty budget deficit, factors both weighing on the rupee. Concerns about rising prices for oil and gold, India's two biggest import items, are keeping pressure on the currency.
What impact have these circumstances had on the gold's chart? Where are the nearest support zones and resistance levels? Let's take a closer look at the daily chart and find out what the current outlook for gold priced in rupees is.
Click to enlarge.
On the above chart we see that the situation has deteriorated since my previous essay was published.
Last week, gold priced in rupees broke above the November 2012 top and reached its new all-time-high at Rs 97,870. In spite of this increase, the breakout was invalidated in the following days and the first corrective move took the price of gold to slightly above the 23.6% Fibonacci retracement level based on the entire June-August rally.
This support level encouraged buyers to act, but they didn’t manage to push the price above the August top. This week, the weakness triggered another corrective move, which pushed the yellow metal below Rs 90,000 per ounce. In this way gold dropped below the 38.2% Fibonacci retracement level based on the upward move from the August low to the August top. Additionally, the price of gold also slipped below the 15-day moving average, which serves as resistance now.