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Gold futures ended marginally lower on Friday but a weakening dollar and firmer oil prices limited losses helped by dollar weakening. Gold is expected to be firm as long as the dollar continues to weaken and oil prices remains strong. Meanwhile, gold is seen as a hedge against oil-led inflation.

COMEX gold futures moved in line with our expectations. As mentioned in the previous update, the rally extended towards $668 levels, which looks like an end to this correction with a possibility now to rally higher towards $680 levels.

However, gains could be capped quite strongly in the $678-80 zone and a failure to cross $680 will signal the return of bears. Any possibility of a fall towards $580 levels can be expected only on a move below $634-35 levels. Supports are in the $658/660 region and dips should find good support in this region.

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. Therefore, expect gold futures to test the resistance levels and correct lower again.

Supports are at $661, 658 and 648. Resistances are at $674, 678 and 681.

Gnanasekar T.

(The author is the Director of Commtrendz Research and also 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 p rice movements and there is risk of loss in trading. He can be reached at gnanasekar_thiagarajan@yahoo.com.)

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