The Hindu Business Line : Gold futures likely to rise

Gold futures, ended slightly higher on Friday helped by a retreating dollar and some short-covering ahead of the weekend. The dollar lost as much as 1.1 per cent against the euro, heading for a second weekly decline, as the US unemployment rate climbed to the highest level since 1994, indicating the financial crisis is taking its toll.

As the credit crisis shows signs of abating, the dollar has started weakening which could support gold prices. However, weakness in demand for commodities and deflation risks could keep the pressure on gold in the short-term, but, the threats for inflation in the long-term still persists.

Comex December gold futures are moving in a range with a bearish bias. Rallies to $745-775 levels are expected to offer good resistance now for a test of recent lows at $680 or even lower.

Price structures do not favour any major upside in the near-term, while the big picture still shows potential to cross the $1,000 mark in the medium to long-term basis.

However, short-term price structures could turn bullish on a daily close above $770. 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 could signal a bullish reversal again.

Therefore, expect gold futures to test the support levels and rise higher.

Supports are at $725, 717 & 707. Resistances are at $756, 775 & 805.

Gnanasekaar 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.)

More Stories on : Technical Analysis | Gold & Silver

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Bay ‘low’ to anchor monsoon revival this week

Seed industry meet to encourage global tie-ups

A new dawn?

Global sugar deficit likely to shrink

Simbhaoli, Modi Sugar start cane crushing

Good demand for Assam CTC leaf teas

Gold futures likely to rise

NY cotton to test support levels

‘Restore customs duty on edible oil imports’

Centre can’t go back on setting up of cashew board: Minister

Pepper drops for want of buying support

Subdued economic growth may hurt demand prospects