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Gnanasekar T.

Gold futures rebounded to finish higher on Friday helped by a weakening dollar and higher oil prices due to renewed concerns of supplies. The dollar dropped to an all-time low against the euro on Friday after data showed the US economy grew much less than expected in the first quarter.COMEX gold futures dropped lower against our expectations. Crucial support is at $661 and only a move below this level will indicate bearish strength, which could again lead prices lower towards $640 levels. Resistance will be quite strong at $686 followed by $691 levels. A double top pattern is also noticed, as seen in the chart above, which is a bearish sign.

Though there are several negative indications, a move above the recent high of $698 will again rekindle hopes of a test of $732 in the coming sessions.

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 $698. 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 bullishness. Prices are below the short-term 8-day period EMA at $686.25 indicating short-term bearishness followed by the 21-day period EMA at $683.

Therefore, expect gold futures to test the support levels and rise higher subsequently.

Supports are at $668, 661 and 655. Resistances are at $686, 691 and 705.

(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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