The Hindu Business Line : Gold futures likely to consolidate

Gold futures, ended sharply lower on Friday as a bleak US jobs report surprisingly led to a stronger dollar eroding the appeal of the precious metals as an a hedge in times of uncertainty, triggering liquidation of all asset classes including commodities. A US government report showed that employers axed payrolls by 5.33 lakh jobs in November, the most in 34 years and far more than expected, and the unemployment rate rose to 6.7 per cent.

Deflationary expectations are also pressuring gold prices, on mounting fears of slackening growth and economic weakness.

Comex December gold futures fell lower against our expectations. As cautioned unexpected fall below $778 dented our bullish hopes. $750 looks to offer some support in the near-term, but crucial support is at $725-28 now and a daily close below this level could lead prices lower towards recent lows at $680. Resistances are at $760 followed by important resistance at $785.

Only a rise above $785 could bring back 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 have gone below zero line of the indicator again, suggesting a bearish reversal. Only a cross-over above the zero line of the indicator could signal bullishness. Therefore, expect gold futures to consolidate and test the support levels.

Supports are at $745, 728 & 698. Resistances are at $760, 785 & 810.

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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