The Hindu Business Line : Gold futures could support level

Gold futures ended sharply lower on Friday hit by fund liquidation and speculative selling in a choppy trade. Easing of worries over geo-political tensions and terror threats led to offloading of positions.

Oil-led inflation concerns too eased, as crude fell below $70 levels before recovering from there. Failure to follow-through higher, despite a weaker dollar and the continued uncertainty and doubts over the Fed's tightening policy has made precious metals investors nervous. Another key thing would be waning physical demand and need to see the current festival season for further clues.

COMEX gold futures have again been choppy, and would continue to be so with a downward bias. As long as prices stay below $638-40 levels, futures are expected to edge lower towards $602 levels or even lower.

This move could negate our overall bullish out look we have maintained thus far. The downside potential is possibly another $30 from current levels. A long-term trend line support lies at $575-78 levels as seen in the chart above and as long as this level is not broken, we are still hopeful of seeing new highs before the year-end.

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.

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 period EMA at $636 indicating short-term bearishness followed by the 34 period EMA at $637. Therefore, look for COMEX gold to test the support levels.

Supports are at $615, $602 and $595. Resistances are at $625, $637 and $645.

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