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Gnanasekar.T

Gold futures ended higher on Friday, with sharp gains due to recovering crude oil futures, inflation fears, on-going political tensions in the West Asiaand North Korea and comments from the Fed chief showing concerns on the mounting deficit.

As expected, the bullish momentum extended higher and is threatening to break the trend line resistance between $640-42 levels. Very strong resistance can be seen in this range and stronger resistance will be seen at $646-47 levels. A daily close above $648 will encourage bulls back into gold futures for a retest of recent highs at $725 or even higher. Our favoured view will be to expect good resistance above $640 followed by a consolidation in the $630 levels going into next week preparing itself for the big move.

We believe that the third wave could have ended at $732 and the corrective fourth wave still in motion. Break above $678 will signal the beginning of the fifth wave move.

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 indicate a bullish signal. Prices are above the short-term 8-day period EMA at $627 followed by the 34-day period EMA at $625. Therefore, expect gold to testt the resistance levels. Supports are at $631, 626 and 621. Resistances are at $640, 643 and 651.

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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