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Gnanasekar.T

Gold futures ended lower on Friday on speculative selling in thin volumes and choppy trading conditions.

Gold rose to a seven-week high on Monday as fighting between Israel and Hizbollah guerrillas in Lebanon raged, which prompted buying of safe havens like gold.

But thin trading interest throughout the week and profit-taking ultimately dragged gold down.

The dollar weakened across the board on Friday on growing speculation that the Federal Reserve may be ready to pause its rate raising campaign next month. Rate hikes usually boost the dollar and pressure gold.

COMEX gold futures fell sharply lower after failing to hold on to important supports. Despite the choppiness during the week, the bigger picture favours gold prices to rise higher. Initial support will be at $611 and as long as $595/97 holds attempts to decline, expect prices to edge higher towards recent highs.

As mentioned earlier, break of crucial support at $648 resulted in a sharp sell-off.

Only if this resistance is taken out, a clear bullish signal would be triggered.

We believe that the third wave could have ended at $732 and the corrective fourth wave possibly ended at $546.

The current impulse shows signs of fifth wave in progress. It could also become an irregular wave B if prices fail to go above $680 and subsequently dip below $594, which we do not favour. 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. Prices are below the short-term 8-day period EMA at $636 indicating short-term bearishness followed by the 34-day period EMA at $627.

Therefore, look for COMEX gold test the support levels and then rise higher.

Supports are at 611, 595 and 578. Resistances are at 628, 635 and 648.

(The author is a director at Commtrendz Research and 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.)

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