The Hindu Business Line : Gold futures could test support

Gold futures ended lower on Friday on the back of a fall in stocks and bond markets. Gold futures fell nearly 3 per cent to a one-month bottom as the firmer dollar weakened the precious metal's standing as an inflation hedge. Markets, took their cue from a midweek collapse in US equities, which slipped as the yield on the benchmark 10-year US Treasury note edged above 5 per cent, prompting speculation that central banks will have to keep raising interest rates to control inflation. Worries over higher interest rates and a possible slowing of the US economy also hammered energy markets, sending crude oil down by $2 a barrel.

Comex gold futures tanked lower against our expectations. As mentioned earlier, the overall bullish price structure could weaken below $634-35 levels and such a fall could lead prices back towards $555 levels. We now expect good support in the $640-41 range failing which we can expect prices to edge lower towards $634 or even lower towards $624 in the coming week.

After failing to cross $700 twice during 2007, futures gave way for a free fall. There is still some hope for an attempt to cross $700 if supported well at $640. 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 still below the zero line of the indicator suggesting bearishness.

Prices are below the short-term 8-day period EMA at $669 indicating bearishness followed by the 21-day period EMA at $668. Therefore, expect gold futures to test the support levels.

Supports are at $645, $640 and $634. Resistances are at $665, $674 and $682.

More Stories on : Technical Analysis | Gold & Silver

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Monsoon active but cools heels on west coast

Avesthagen plants Kodagu orange in Hassan orchard

35,000 tonnes tied-up cane lying in AP fields

Darmona tea gets record price at Coonoor sale

CTC leaf, dust varieties witness good demand

Gold futures could test support

Cotton to test support, rise

Zinc prices may turn bullish

Oil complex in correction mode

Spices export rises 44% in April

Pepper futures decline during the week

Bodi auction: Cardamom arrivals at 47 tonnes

Crash in gold prices provides buying opportunity

Mentha oil prices may fall