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Comex gold futures ended higher after briefly breaching $900 an ounce on Friday, as uncertainties in the financial markets and inflation fears prompted investment buying. The value of gold as a safe-haven investment was boosted due to worries of further write-downs among major financial institutions and credit market meltdown in the US. Inflation worries stemming out of agricultural complex, which made new highs in wheat, corn and edible oils also lifted gold during the week. The interesting thing to note is that gold rallied on Friday despite a lack of support from the usual bullish factors, the dollar and energy prices.

Comex December gold futures moved in line with our expectations. We are now close to our medium-term targets of $910. Extension to $935 cannot be ruled out on an impulse. As we crystal gaze further into 2008 and beyond, we believe there could be potential for a rise towards $1,200 per troy ounce. However, sharp corrective falls will also take place as the leverages increase. Important supports are now at $884 followed by $865. 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 $775-800 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. 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 to test the resistance levels.

Supports are at $885, 874 & 867. Resistances are at $910, 9240 & 937.

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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