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Gnanasekar T.

Gold futures ended lower on Friday, following crude oil prices, which reversed direction to hit its 2006 low on doubts that OPEC could implement a production cut announced earlier.

The main focus for gold currently remains the oil markets as market participants bought gold as an inflation protection strategy. Crude is down 27 per cent since hitting a record above $78 a barrel in mid July, meaning less demand for gold as inflation insurance.

COMEX gold futures rallied higher in line with our expectations. However, failure to close the week above $600 and a rebound from the trend line resistance at $606-07 levels casts doubts on a possible recovery in gold.

Supports will be strong at $587-88 levels now and a move below $583 is expected to signal a test of $568 levels being the trend line support point or even lower.

Our favoured view is to look for support at $587-88 levels to hold for a test of $612-13 levels.

We believe that the third wave could have ended at $732 and the corrective fourth wave is still in motion. RSI is in the neutral zone indicating that it is neither overbought nor oversold.

The averages in MACD are still below the zero line of the indicator suggesting bearishness to be intact. Only a crossover of the averages above the zero line will signal a bullish reversal.

Prices are above the short-term 8-day period EMA at $593, followed by the 34-day period EMA at $597. Therefore, look for Comex gold to test the support levels and rise higher subsequently. Supports are at 587, 583 & 568. Resistances are at 603, 612 & 615.

(The author is the director of 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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