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Comex gold futures ended sharply lower on Friday, after the dollar rebounded reducing the appeal of precious metals as an alternative investment. Gold has rallied 23 per cent this year as the US currency fell to a record low against the Euro.

Speculative positions reached a record last week and the subsequent correction towards the end of the week does not seem to throw major surprises.

The fundamental outlook for the dollar has still not changed drastically and will continue to be a crucial factor in gold’s ascent to new all-time highs.

Comex December gold futures corrected lower in line with our overall expectations. As cautioned in our previous updates, there is good possibility to retest the all-time highs, however, caution needs to be exercised in light of heavily overbought conditions as a corrective move could unfold and volatility could be seen in the coming weeks. We view this fall as a correction within the up trend only. Initial support is at $774 followed by $748 levels. Favoured view expects $773 levels to hold well for the rally to resume higher again.

We believe that the third wave could have ended at $732 and the fourth wave consolidation at $665, and the fifth wave in progress. RSI is in the neutral zone now 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 indicate bearishness. Therefore, expect gold futures to test the support levels and rise higher subsequently.

Supports are at $782, 773 & 748. Resistances are at $ 795, 815 and 832.

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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