The Hindu Business Line : Gold could test resistance level

Gold futures rose to eight-week highs on Friday, shrugging off a pullback in the dollar and latching on to recovering oil prices. Dollar strengthened against the major currencies after the US Labour department said unemployment rate fell to 4.4 per cent the lowest since 2001.

Though there was profit taking in gold on this news, a 2 per cent surge in NYMEX crude oil took over as a support for gold, which is considered an inflation hedge. Interest in investment demand for gold has returned and global political tensions can once again re-emerge as support.

COMEX gold futures rose higher perfectly in line with our expectations. Minor resistance was seen near $630. Some more resistance will be seen at $633/35 levels, and above $635, the next objective would be $646 followed by $651-53 levels.

Supports will be strong at $617 and as long as $611 remains undisturbed, we can expect prices to test the resistance levels mentioned above. As mentioned in the previous update, several technical signals were confirming a bullish reversal and this could possibly be a trigger for a retest of $730 or even higher.

We believe that the third wave could have ended at $732 and the corrective fourth wave still in motion. RSI is in the neutral zone indicating that it is neither overbought nor oversold. The averages in MACD have gone above the zero line of the indicator suggesting a bullish reversal. Only a crossover of the averages below the zero line will signal bearishness again. Prices are above the short-term 8-day period EMA at $613 followed by the 34-day period EMA at $603. Therefore, look for COMEX gold to test the resistance levels.

Supports are at $621, 615 and 607. Resistances are at $635, 646 and 655.

(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 at gnanasekar_thiagarajan@yahoo.com.)

Gnanasekar T.

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