The Hindu Business Line : Gold to test support, rise higher

Comex gold futures ended marginally lower, coming under pressure from weaker oil prices and a stronger dollar reducing demand for the metal as an alternative investment to the US currency. Gold is heading for a third-consecutive weekly drop.

The metal has also declined as oil prices weakened, reducing the appeal of the metal as a hedge against inflation.

Comex December gold futures headed lower in line with our expectations. Important support now lies at $901-902 levels, below which could open the way for fall towards $877 or even lower in the coming sessions. We are still holding a bullish view in the bigger picture with possible targets at $1,100 after this correction/consolidation is over. Only a fall below $845 will force us to abandon our bullish view in the bigger picture.

As seen in the bigger picture chart, we still view this fall to $877 or below to be a corrective move and expect a rise higher again. We believe that the third wave could have ended at $1,033 and the fourth wave that we have been tracking could still be in formation and not ended as expected in the previous update.

The RSI is in the neutral zone, indicating that it is neither overbought nor oversold. The averages in MACD have gone below the zero line of the indicator, suggesting a bearish reversal. Only a cross-over above the zero line of the indicator would signal a bullish reversal again. Therefore, expect gold to test support levels and rise higher subsequently.

Supports are at $910, 901 & 885. Resistances are at $926, 937 & 945.

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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