The Hindu Business Line : Bullish trend intact in Comex gold

Comex gold futures ended lower on Friday on profit-taking ahead of the weekend as the dollar firmed. A relatively stable dollar gave little impetus to buy the metal, and higher oil prices helped mitigate losses.

As the dollar falls, greenback-denominated commodities become cheaper to purchase in other currencies, stimulating buying. Further, gold often acts as an alternative currency, when the dollar weakens. Open interest in gold futures continues to set new records and this should caution investors against aggressive longs.

Comex December gold futures continues to rise in line with our expectations. Initial resistance is seen at $755. As expected we saw a direct rise above $755 resulting in a push higher. Initial resistance will be seen at $760 followed by strong resistance at $773 levels. A corrective decline is expected to take place after this move, however, if the momentum remains strong there is good possibility of this current move even to test $785. Close below $745 can cast doubts on the bullish structure in the coming week. As mentioned in the previous update, the current rally looks set to test $780-800 levels.

We believe that the third wave could have ended at $732 and the fourth wave consolidation to have ended, and the fifth wave has begun with potential targets at $780.

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 subsequently.

Supports are at $748, 738 & 731. Resistances are at $760, 773 and 785.

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 price movements and there is risk of loss in trading. He can be reached at gnanasekar_thiagarajan@yahoo.com.)

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