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Comex gold futures ended sharply higher on Friday after the release of non-farm payroll data. The US unemployment rose to 5.5 per cent in May from 5 per cent, its highest since October 2004. Some 49,000 jobs were cut from payrolls in May, up from a revised 28,000 that were lost in April. Also weighing on the dollar and boosting the euro and precious metals was a speech by the European Central Bank President, Mr Jean-Claude Trichet, who said on Thursday that the central bank was on high alert over inflation. Solid gains in the oil markets have once again put inflation right back on the front burner, underpinning gold prices further.

Comex June gold futures fell lower as per expectations. But, the pullback has been impressive towards the end of the week and shows promise again to reach for the four-figure mark. Important resistance is at $916-17 levels now, being a trend line resistance point. Only a daily close above $921 could revive bullish expectations clearly now. Dips could be well supported at $895 followed by $880 levels. Fall below $880 could force us to abandon our bullish bias. We believe that the third wave could have ended at $1033 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. 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 cross-over above the zero line will now restore confidence for bullishness ahead. Therefore, expect gold to test the resistance levels.

Supports are at $895, 880 & 875. Resistances are at $915, 921 & 955.

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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