The Hindu Business Line : Gold still looks bullish

Gold futures ended higher on Friday helped by a weaker dollar after a weaker-than-expected jobs report and pre-weekend buying drove US gold futures to a one-week high. The dollar fell broadly, in tandem with the US stock market, as surprisingly weak economic data exacerbated concerns about the US housing and credit sectors. However, gold sales by European central banks are expected keep a lid on prices. The current CBGA agreement came into force in September 2004 and bound banks to cap total sales at 2,500 tonne in the 2004 to 2009 period, compared with 2,000 tonnes in the previous five years.

COMEX December gold futures pulled back smartly against our expectations, but still does not look very convincing. Important resistance will be seen at $689/90 levels now. Breach of $689 has the potential to take prices further higher towards $698/700 levels. As mentioned in the previous update, rise above $678 hinted that market has discounted the bearishness with the possibility of a rise above $700 again. Though momentum favours a rise towards $700 levels again, our favoured view is still bearish for a fall below $635. Only a move above $698/99 will signal bullishness again. 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 resistance levels.

Supports are at $678, 665 and 658. Resistances are at $689, 698 and 705.

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