The Hindu Business Line : Gold to test resistance levels

Comex gold futures ended higher on Friday, as crude oil futures climbed higher and the dollar slid lower. Platinum also jumped higher on the launch of an ETN (Exchange Traded Notes), which rubbed off on gold as well.

Though the strengthening of the dollar could adversely affect gold prices, a real recovery in the US economy is unlikely to occur before 2009. The continued uncertainty in the equity markets are also expected to underpin gold prices.

Comex June gold futures rose higher as expected. Rallies to $875 followed by $883 found good resistance. However, important resistance is at $893-95 levels, now being a falling trend line resistance point, as seen in the chart above. An important fibonnaci retracement point lies at $850, which has been tested.

Though there are short-term indications of bullishness, the crucial resistance at $895 needs to be surpassed. Resumption of bullish trend will be confirmed after a daily close above $907.

We believe that the third wave could have ended at $1,033 and the fourth wave is in progress right now. We could now be tracking a wave four A-B-C in progress and once the correction ends, a potential fifth-wave impulse could be in the making.

The RSI is in the neutral zone, indicating a negative divergence, a sign of possible intermediate top, one of the reasons for our expectations of a large downward correction.

The averages in MACD have gone below the zero line of the indicator, suggesting a bearish reversal. Only a crossover above the zero line will now restore confidence for bullishness ahead. Therefore, expect gold to test the resistance levels.

Supports are at $875, 863 & 854. Resistances are at $895, 907 & 925.

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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