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Gold futures, ended lower Friday in a volatile session owing to profit-taking and liquidation in other commodities. While turning lower, gold nevertheless still has been outperforming other commodities. Though there has been good investment demand by way of coins, but liquidation pressure to raise cash in a cash-starved market led to a sell-off subsequently. Expectations of additional financial-rescue measures are emerging over the weekend. A weekend meeting of Group of Se ven finance ministers and central bankers takes place in Washington.

Comex December gold futures oscillated wildly before succumbing to profit-taking ahead of a weekend which could be headline driven. A messy consolidation between $822 and $933 is in progress presently. Favoured view expects the lower side of the consolidation to hold supports and ultimately test the important near-term resistance at $960 or even higher. However, a daily close below $818 would force us to abandon our bullish view.

Such a fall has the potential to test $768/70 being a long-term rising trend line support point. 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 consolidate and rise higher.

Supports are at $838, 822 & 798. Resistances are at $887, 903 & 926.

(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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