The Hindu Business Line : Comex gold to test resistant levels

Comex gold futures ended lower on Friday on profit-taking, once again unable to surpass the $-1,000 mark decisively, despite robust energy prices and a weaker dollar. The yellow metal rose sharply in a knee-jerk reaction to the second straight fall in the US non-farm payrolls but the gains soon disappeared. Threat of IMF gold sales looms large on the market. Recessionary fears and expectations of further rate cuts are positive for gold. Production problems and producer de- hedging and huge investment interest are fundamentally a strong sign. Although fundamentals support gold futures, a technical correction could unfold going forward.

Comex April gold futures rose higher as expected. Failure to cross the psychological $-1000 mark could dampen sentiment and result in profit-taking. Either we could expect a sideways correction or a outright sell-off towards $955 levels or even lower in the coming week. However, we will still view this as a corrective fall within a bullish trend. Direct rise above $994 could dent our corrective expectations and rise towards $1,030 subsequently. As we have been maintaining, going further into 2008 and beyond, we believe there could be a potential for a rise towards $1,200 per troy ounce. Supports are at $967 followed by $953. As long as support at $931 holds, our favoured view expects a test of $1,031. We believe that the third wave could have ended at $732 and the fourth wave consolidation at $665, and the fifth wave in progress. There are still no signs of the end of fifth wave. RSI is in the overbought zone now indicating that is a possible correction in the offing. 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 test the resistance levels and correct lower.

Supports are at $967, 955 and 931. Resistances are at $992, 997 and 1,031.

Gnanasekaar 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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