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 weakened, boosting the appeal of precious metals as a hedge against inflation. Record high crude prices continue to underpin gold prices, as it stoked inflationary concerns. Gold is still cheap in relation to oil, which has doubled in the past year. In the past two months, gold has dropped 10 per cent, while oil has climbed 14 per cent. The continued uncertainty over the housing s lump and the sub-prime mortgage crisis reminded that the US economy is not out of the water yet.

Comex June gold futures tested the resistance levels as per our expectations. Daily close above $895 is seen as a bullish sign. Resumption of bullish trend will be clearly confirmed after a daily close above $907. Immediate resistance is at $925 levels now followed by $932. Dips to $890 are expected to cushion downside attempts from here. Fall below $880 would dent our bullish hopes. 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 is in progress and once the correction ends, a potential fifth-wave impulse could be in the making. Only a rise above $955 would confirm this view. The RSI is in the neutral zone indicating that it is neither overbought nor oversold. The averages in MACD are still 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 $890, 880 & 864. Resistances are at $907,925 & 932.

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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