The Hindu Business Line : Comex gold may fall lower

Gold futures, declined on Friday ending the week with a loss of more than six per cent, after the US House of Representatives approved the $700-billion plan to bail out the financial sector. Precious metals declined this week as investors sold holdings to cover losses in other markets. Pressure to raise cash is forcing funds and long-term players to exit long positions. Gold has still not lost its safe haven position and the bailout plan accomplishes little to turn the eco nomy around and is intended to arrest the fall and boost the sentiment in the short-term.

Comex December gold futures fell lower against our expectations. The consolidation followed by a rise we were anticipating did not materialise. Fall below $845 was a bearish trigger. There is one more support at $818/20 levels. Any rallies towards $858/60 to find strong resistance now. Price structures favor a fall towards $768/70 being a trend line support point.

Unexpected rise above $865 could cause doubts on our bearish view. 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.

Indicators are still displaying positive divergences, where prices are making a lower low not confirmed by a lower low in the indicator, a sign of a bullish turnaround. 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 to signal a bullish reversal again.

Therefore, expect gold futures to fall lower.

Supports are at $820, 795 & 768. Resistances are at $845, 860 & 881.

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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