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Gnanasekar. T

Gold futures ended higher on Friday, boosted by surging oil prices and fund buying. Gold had been strongly correlated to the oil price since the beginning of this year, a trend which, is expected to continue unless the dollar moves significantly against other currencies.

Oil breached the psychologically key mark of $60 per barrel for the first time in more than a month, driven by tightening supplies and worries about rising US tensions with Iran.

COMEX gold futures rose higher in line with our favoured view. Good resistance will be seen at $676-78 levels being an important previous top. A bullish continuation pattern has broken out targeting $683-85 levels. Though it looks clearly headed higher, caution needs to be exercised and corrective declines are expected on all rallies.

Important support is now at $662 followed by $656-58 levels. Our favoured view next week will be to expect resistance initially at $677-78 followed by a correction lower or a sideways move. Unexpected move above $682 will be a decisive move targeting recent highs at $725 again.

We believe that the third wave could have ended at $732 and the corrective fourth wave still in motion. Break above $678-81 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 above the zero line of the indicator suggesting a bullish reversal. Prices are above the short-term 8-day period EMA at $660 followed by the 34-day period EMA at $643. Therefore, expect gold to test the resistance levels.

Supports are at $664, 658 and 652. Resistances are at $677, 682 and 691.

(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.)

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