Gold futures rallied higher Friday after reports of an explosion at a crude oil facility in Saudi and shooting in the area. The market also was digesting a World Gold Council report showing fourth quarter 2005 global demand for gold fell 15 per cent from the year-earlier quarter to reach 943 tonnes. Demand in dollar terms hit a record high of $53.6 billion in 2005, as all major categories of usage - jewellery, industrial and investment - recorded double-digit growth as measured in dollars, WGC said. However, worldwide jewellery demand fell 15 per cent in the fourth quarter versus the year-earlier quarter, to 683.2 tonnes, discouraged by prices hitting 25-year highs on fund and speculative buying. Rising oil boosted gold as investors get attracted into commodities in general and as a number of traders turn to gold as a hedge against inflation. COMEX gold futures rallied higher after the important trend line support at $538 levels held well. Short-term picture hints at a rise higher towards $570 levels again or could even extend above the recent high of $579. Declines will now be well supported at $548-50 levels. Big picture charts looks clearly bullish, with an immediate potential to test $587 levels. This could be confirmed only after a daily close above $568-69. As per our recent wave counts, we believe the current third wave to have ended at $575. A corrective fourth wave move could have ended at the recent low of $537. A possible fifth wave impulse is in progress now. RSI is in the neutral zone indicating that it is neither overbought nor oversold. The averages in MACD are still above the zero line of the indicator suggesting bullishness to be intact. Only a cross-over of the averages below the zero line will signal bearishness again. Prices are above the short-term 8 period ema at $555 an indication of short-term bullishness followed by the 34 period ema at $550. Therefore, look for Comex gold futures to test the resistance levels in the coming sessions.
Supports are at 555, 549.5 and 546. Resistances are at 563, 568 and 574.
(The author is in the advisory panel of Multi Commodity Exchange of India Ltd (MCX). The views expressed in this column are his own and not that of MCX. This analysis is based on the historical price movements and there is risk of loss in trading. He can be reached at gnanasekar_thiagarajan@yahoo.com.)
