The Hindu Business Line : Gold futures may rise

Gold futures ended sharply higher boosted by a weaker dollar amid a broad based advance in most of the commodities. This along with firmer crude oil prices helped the entire precious metals complex reach multi-month highs.

It remains to be seen if it has the momentum to push above the psychological resistance of $700. The net speculative long positions are on the rise again as per the CFTC data released this week. This could lead to unprecedented profit booking by speculators above the psychological resistance levels.

COMEX gold futures moved perfectly in line with our expectations. Prices are near the crucial trend line resistance point at $693-94 levels. Break of $694 will give rise to hopes of a test of recent high at $732 or even higher. In the bigger picture, the price pattern indicates a possible rise to $875 in the coming months.

Though it looks ambitious now, the technical pattern indicates this possibility and only a move below $661 will cast doubts on this expectation. Alternatively, failure to surpass $695 and a further fall below $655 will postpone the big move temporarily, leading to another round of consolidation before taking out the recent high.

We believe that the third wave could have ended at $732 and the current move being a fourth wave consolidation and the beginning of a fifth wave impulse will be confirmed above $695. RSI is in the neutral zone indicating that it is neither overbought nor oversold. The averages in MACD have are above the zero line of the indicator suggesting bullishness.

Prices are above the short-term 8-day period EMA at $681 followed by the 21-day period EMA at $674. Therefore, expect gold futures to rise higher and test the resistance levels. Supports are at $685, 678 and 671. Resistances are at $695, 706 and 732.

(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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