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Gold futures, ended moderately higher on Friday helped by a recovery in the US equity markets which an economic indicator. Markets will also be eyeing the next week’s US manufacturing, payrolls and auto sales data for further clues on economic strength. Terror attacks in Mumbai also underpinned gold as a safe-haven purchase. Over last few months when stock markets lost a significant amount of ground, all asset classes, including gold and other precious metals positio ns, were liquidated for cash due to the credit crisis. Comex December gold futures moved perfectly in line with our expectations. As mentioned in the previous update, the short-term picture was turning bullish for gold, and favoured the rally to stretch towards $835-845 levels.

Subsequently, there has been a consolidation, which gives hope for the bullish rally to continue and rally towards $860-65 levels. Good support will be seen at $803-10 now. Fall below $798 could postpone the bullishness and an unexpected fall below $778 could dent our bullish hopes. 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 are above the zero line of the indicator, suggesting a bullish reversal. Only a cross-over below the zero line of the indicator again could signal bearishness. Therefore, expect gold futures to consolidate and test the resistance levels. Supports are at $810, 803 & 778. Resistances are at $831, 845 & 865.

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.)

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