The Hindu Business Line : Comex gold to consolidate, rise

Gold futures ended sharply higher on Friday helped by a weakening dollar as the US economic readings worsened and boosted the appeal for precious metals. The outlook for 2009 looks quite positive for gold.

Once the monetary easing comes to an end, the world may be facing serious inflationary pressures later. The current global bank bailout is inflationary, and will likely result in more money chasing the commodities. In turn, the combination of higher c ost of money and higher input cost inflation could force oil back up to $100/bbl. As gold would continue to maintain its long-run relationship with other commodities, gold prices, could well push higher to $1,200/oz.

Comex December gold futures are gradually edging higher. As mentioned earlier, very important support is at $809 now, and as long as this level remains undisturbed, there are good chances of this bullishness to remain and rise towards $920-25 levels in the coming sessions. Ideally, we expect a test of $1,055 or even higher as long as the important supports hold. Unexpected fall below $842 could trigger weakness and such a fall could take prices lower again towards $810-15 levels. 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 in the process of a beginning of a new fifth wave impulse. 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 again, suggesting a possible bullish reversal. Only a cross-over below the zero line of the indicator could signal bearishness. Therefore, expect gold futures to consolidate and rise higher.

Supports are at $852, 843 & 823. Resistances are at $878, 890 & 917.

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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