The Hindu Business Line : Downward tweak likely in gold

Gold futures ended higher on Friday as investors in stocks and other markets began returning to gold looking for a haven as the dollar fell and the Federal Reserve moved to inject cash into the liquidity strapped credit markets, sending the precious metal high enough to erase much of the week’s losses. European central bank and central banks in Australia, Japan and Singapore also added funds to the market. However, the threat of central bank gold sales is still seen capping the upside, till the deadline gets over in September.

COMEX December gold futures have been yo-yoing the whole week in a volatile range in line with the other asset classes. The bias is bearish presently, as long as the $688-93 zone caps the upside.

Near-term support is at $665 levels and a fall below could signal a bearish undertone with the potential to test $635 or even lower. A bearish head-and-shoulder pattern is also in the making as there are better chances of a fall lower now.

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 and correct lower.

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

Gnanasekar T.

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