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Comex gold futures tumbled lower on Friday, from 28-year highs on month-end and year-end profit-taking. Heightened volatility was seen as prices were pulled between oil and a strengthening dollar.

The Federal Reserve Chairman, Mr Ben Bernanke, said on Thursday, a resurgence in financial strains in recent weeks had dimmed the outlook for the US economy, signalling an openness to again lowering interest rates. Any further cut in US borrowing cost s could be beneficial for gold as it dents the dollar’s yield potential, drawing investors towards alternative assets.

However, a shy at the recent high of $850 before the year-end now looks unlikely.

Comex December gold futures headed lower against our expectations. As mentioned in the previous update, risk for our bullish view was a break below $803. Recent support at $773 is expected to hold failing which we could see prices edge lower towards $765 levels. Resistances will now be seen at $795 followed by $805. The bigger picture supports a bullish market for gold ahead despite this correction, and therefore advise caution on getting excessively bearish.

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 $773, 765 & 748. Resistances are at $795, 805 and 815.

(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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