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Gold futures ended sharply higher Friday reaching a three-and-half month high fuelled by flight-to-quality buying and investment demand into bullion. investors overall were allocating more of their portfolio money into gold instead of other asset classes such as stocks, and the move fuelled the yellow metal’s latest rally. Gold rose in spite of a two per cent drop of US equities, ignoring a lower appetite for risky assets. The world’s biggest gold-backed ETF, N ew York’s SPDR Gold Trust, said its holdings jumped more than 10 tonnes on Thursday to a record 843.59 tonnes. However, this rise could dampen physical demand for jewellery and remain a cap on the upside.

Comex December gold futures rose perfectly higher in line with our expectations. As mentioned in the previous update, there were good chances of prices to rise towards $920-25 levels in the coming sessions. Ideally, we expect a test of $940, being a trend line resistance or even higher as long as supports at $905 holds. Prices could even rise towards $1,055 a potential medium-term target. However, unexpected fall below $882 could dash our bullish hopes. And such a fall could take prices lower again towards $845 levels, which we do not favour. 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. Move above $940 could confirm the beginning of the 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.

Supports are at $915, $905 and $882. Resistances are at $932, $940 and $978.

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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