The Hindu Business Line : Gold may test support level

Gold futures settled marginally higher on Friday trading broadly sideways tracking the range bound nature of the other related markets, the dollar and oil. This situation tallies with the typical seasonal patterns across all asset classes, which go through a dull phase over the summer months.

COMEX gold futures are trapped in a range. The upside potential presently remains limited to $655 levels with immediate resistance at $640-43 levels. Broadly gold should work in the $610-650 range with a good possibility to take out the support at $602. However, in the bigger picture trend line support lies at $575-78 levels 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. Currently, we could be in a corrective move within the fifth wave it could also become an irregular wave "B" if prices fail to go above $680 and subsequently dip below $575.

RSI is in the neutral zone indicating that it is neither overbought nor oversold. The averages in MACD have gone below the zero line of the indicator suggesting bearishness. Prices are below the short-term 8-day period EMA at $633 indicating short-term bearishness followed by the 34-day period EMA at $636. Therefore, look for COMEX gold to test the support levels.

Supports are at $615, 602 and 594. Resistances are at $638, 645 and 655.

(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 atgnanasekar_thiagarajan@yahoo.com.)

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