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Comex gold futures ended marginally lower after scaling to contract highs on Thursday as bullion investors took profits on a drop in crude oil prices after the US jobs data came in sharply weaker than expected. After such a strong showing in a couple of weeks the tendency to take profits was compelling on Friday. Falling crude oil prompted investors to lock in recent profits. US crude futures dropped about $1 to $98 a barrel. Gold is often used by investors as a hedge agai nst inflation. Gold’s strong gains were already reflecting a likely rate cut by the Federal Reserve out of fears of a recession due to a slowing economy and oil-led inflation.

Comex December gold futures moved in line with our expectations. We could now expect a consolidation or a corrective down move. Initial support is at $855/56 levels and break below could trigger a fall towards $835. The overall uptrend still looks intact for a test of $910, as long as $827 holds any downside attempts.

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. 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 overbought zone indicating a downward correction to take place.

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 consolidate and rise higher again.

Supports are at $855, 846 & 837. Resistances are at $878, 890 & 910.

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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