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Comex gold futures fell from the highest in 27 years after crude oil futures declined from a record and the dollar rebounded, reducing the appeal of the precious metal as a hedge against inflation.

However, expectations that the Federal Reserve will cut interest rates again this year and weaken the dollar helped limit gold’s losses. Tremendous investment interest in gold is seen presently, with ETFs backed by bullion showing a record 594 tonnes. Gold is still expected to rise higher, as investors seek a haven from credit-market turmoil related to the collapse of sub-prime mortgages.

Comex December gold futures continues to rise in line with our expectations. The correction we expected at $773 levels did not materialise. As mentioned in the previous update, if the momentum remains strong, there is a good possibility of this current move even to test $785. In the coming week, corrective retracements, if any, would be supported near $759, $756.00 or $755. It needs to fall below $749 to change this view. Favoured view is bullish and expects $759/755 region to cushion corrective dips. As mentioned earlier, 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 at $665, and the fifth wave has begun with potential targets at $780 or even higher. RSI is in the highly overbought zone cautioning against aggressive longs. 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 $763, 755 & 748. Resistances are at $778, 790 and 825.

Gnanasekar T.

(The author is the director at Commtrendz Research and 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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