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Gold futures ended lower on Friday on the back of profit-booking in the global equity markets and yen carry trade unwinding.

The dollar, meanwhile, rebounded sharply helped by a solid gross domestic product (GDP) reading and as credit fears prompted investors to repatriate funds from overseas. Also, data from CFTC clearly indicates speculators were net long 54 per cent in t he week to July 24 as prices hit 2-1/2-month high, which explains the massive liquidation post that.

COMEX gold futures tanked lower after failing to cross the $686-88 range once again. Prices are now threatening to test the recent lows at $640 and a break below $635-37 could open the way for a fall towards $620 or even lower. A minor head-and-shoulder pattern is also in formation, which is bearish.

Rise above $678 will hint that market has discounted the bearishness with the possibility of a rise above $700 again. However, our favoured view is now bearish for a fall below $635.

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 above the zero line of the indicator suggesting bullishness to be intact.

Only a cross-over below the zero line will be a clear bearish sign. Therefore, expect gold futures to test the support levels.

Supports are at $658, 645 and 638. Resistances are at $667, 674 and 680.

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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