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Gnanasekar T.

In just two days what was a popular safe haven investment turned bearish, hit by variety of factors. Unwinding of carry trade positions affected the markets. Low-yielding currencies like the Japanese yen, a cheap source of funds was used to buy higher-yielding currencies and assets.

The fall-out in the global financial markets mainly equities ravaged precious metals. Since all asset classes went up together, a new phenomenon, the fall together is not surprising. Fundamentally, though, gold could get very attractive soon.

COMEX gold futures fell sharply breaking key support levels with considerable ease. This move has shattered some of the long-term beliefs of gold prices to reach its all-time highs. Gold futures have been extremely choppy off late with extreme volatile conditions. A strong trend line support is at $630-32 levels. Unexpected break here could target the year's low at $603 again.

There are several support levels below $630 levels and our favoured view is to expect support near the trend line support point in the $627-631 range. We believe that the third wave could have ended at $732 and with the way prices have moved higher, we feel the fifth wave is in motion with no specific targets. Move below $603 will neutralise this expectation.

RSI is in the neutral zone indicating that it is neither overbought nor oversold. The averages in MACD are still above the zero line of the indicator suggesting bullish to be intact. Prices are below the short-term 8-day period EMA at $669 followed by the 34-day period EMA at $660. Therefore, expect gold to test the support levels and rise higher again.

Supports are at $638, 629 and 615. Resistances are at $656, 668 and 675.

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