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Gold futures, ended sharply lower on Friday prompted by a dollar recovery which resulted in a sell-off in the overall commodity complex. Investor confidences towards other asset classes are on the rise and as a result, bullion could loose its safe haven appeal and the premium it had during the recessionary phase. This was evident from the SPDR Gold trust holdings, the world’s largest bullion exchange traded fund, showing no increase consecutively for the second week. Crude oil prices also took a breather correcting lower on Friday. Gold has historically tracked oil prices, as it is often bought as a hedge against inflationary pressures sparked by higher crude.

Comex August gold futures moved according to expectations. As mentioned in the previous update, we still view the price structures to be positive for $1,000 and above as long as $915 remains undisturbed. Very important trendline support is at $923-24 levels as seen in the chart above. Our favoured view is to expect a consolidation in the $925-964 zone the coming weeks, before gold attempts to test the psychological $1,000-mark. However, unexpected fall below $921 followed by crucial support at $915 could dent our bullish expectations. And such a fall has the potential to drag prices even lower towards $865 levels again. We believe that the third wave could have ended at $1,033 and the fourth wave that we have been tracking could have ended at $681 and fifth wave impulse in progress. A daily close above $1,000 is a confirmation of the same. The RSI is in the neutral zone now, indicating that it is neither overbought nor oversold. The averages in MACD are above the zero line of the indicator again, suggesting bullishness to be intact. Only a cross-over below the zero line of the indicator could signal bearishness again. Therefore, expect gold futures to test the support levels.

Supports are at $935, 926 & 915. Resistances are at $955, 964, & 978.

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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