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Comex gold futures ended sharply higher on Friday, on geo-political tensions in Pakistan and a weak dollar propping up the safe-haven asset. Gold futures came very close to testing the all-time high before weekend and year-end profit-taking began. Going into 2008, gold is expected to remain underpinned due to a weaker dollar, rising inflation, higher oil prices and geo-political tensions. Only a turnaround for the dollar and retreating oil prices could add pressure to gold prices in 2008. Investment demand for gold is on the rise and will compensate for lack of jewellery demand due to high prices and possible central bank sales. Another threat for gold prices in 2008 could be IMF’s ability to convince the US to sell its gold reserves for providing relief for the poor countries.

Comex December gold futures as expected is on the verge of breaking out of the consolidation with near-term targets at $860 followed by medium-term target at $910. As mentioned earlier, the bigger picture supports a bullish market for gold ahead in 2008. Post this rally there could be a corrective fall lower towards $750 levels from where the next move up could prepare itself from. Immediate support is at $838 followed by $818 levels. As long as these support levels hold, we can expect the bullish trend to continue in the near-term towards the objectives mentioned above. 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 rise higher.

Supports are at $837, 828 & 815. Resistances are at $851, 860 & 878.

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