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Gold futures ended lower as a rally in equities sparked off pre-weekend profit-taking and oil’s retreat only added to the bearish sentiment. Further pressure on the metal came as oil prices pulled back and easing Russia-Georgia tensions erased gains made during the week on the back of some safe haven buying. This is euro weakness and not dollar strength and we are still not convinced that the US dollar can stage a meaningful rebound. Gold should be holding up. Inflat ion worldwide remains a threat, and the continuing credit crunch and spreading economic worries should make gold an attractive safe haven bet.

Comex December gold futures pulled back higher in line with our expectations. As mentioned earlier, rise above $810 resulted in a pullback higher towards $845 levels. Ideally, we expect a consolidation in the $815 to $840 range in the coming week, followed by a rise towards $858 or even higher.

A fall below $805 could dent the bullish expectations and such a fall could target recent lows at $778 or even lower towards $750 levels. Favoured view expects a rise higher post the consolidation. 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 $815, 805 & 785. Resistances are at $835, 848 & 857.

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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