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Gnanasekar T.

Gold futures ended higher on Friday, on a slew of positive data bought investors back into gold. A rise in US consumer prices, along with the weaker dollar worked to keep gold's strength intact. Investors have started to regain confidence after the recent drop.

Recent report from CFTC suggests speculative long positions have been trimmed and there could be more scope of long liquidation as prices climb higher. Direction for gold will still depend on moves in stock markets, currencies and commodities.

COMEX gold futures bounced higher decisively. There are minor signs of bullish reversal seen, however, it is too early to confirm that. A close above recent high of $660 could be a bullish sign taking it higher towards $668-70 or even higher towards $676-78 levels. Support will now be seen at $643-45 levels.

Unexpected drop below $643 could rekindle bearish expectations again. As mentioned earlier, the bigger picture is still within a broad consolidation preparing itself for a bigger move on the up side.

We believe that the third wave could have ended at $732 and the recent fall has once again created doubts on whether a fifth wave impulse has begun or not. Then we could still be in a messy fourth wave move.

RSI is in the neutral zone indicating that it is neither overbought nor oversold.

The averages in MACD are below the zero line of the indicator suggesting a bearish reversal. Only a crossover of the averages above the zero line of the indicator will signal a clear bullish trend again.

Prices are above the short-term 8 period EMA at $651 followed by the 34 period EMA at $655. Therefore, expect gold to test the resistance levels in the coming week.

Supports are at $645, 635 and 623. Resistances are at $660, 668 and 675.

(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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