The Hindu Business Line : Gold to test resistance and fall

The US dollar’s loss continues to be gold’s gain, as the most-active gold futures hit a 16-month high during the week and nearby futures hit a 28- year high.

Gold has risen 16 per cent this year and is headed for the seventh straight annual gain.

The Federal Reserve’s first interest-rate cut in four years has weakened the dollar and sparked inflationary concerns. The Fed cut its benchmark interest rate on September 18 by half a point to 4.75 per cent.

Comex December gold futures rose sharply higher in line with our expectations.

Resistance at the $628-635 zone was taken out easily thus becoming a good support levels in the coming week. The current rally looks set to test $780-800 levels. Corrective dips can be seen towards $725 or even lower towards $713 levels before the rise higher.

As mentioned earlier, there are positive signs in the bigger picture, which could finally open the way for the test of the all-time high at $850 and therefore regard corrective dips as opportunity to position longs again.

We believe that the third wave could have ended at $732 and the current move being a fourth wave consolidation and the fifth wave has begun with potential targets at $765.

RSI is in the overbought zone indicating a minor correction in the offing. 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 subsequently.

Supports are at $735, 725 & 712.

Resistances are at $748, 765 & 780.

Gnanasekar T.

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