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Comex gold futures ended at a record high on Friday as investors sought safe-haven after data showed the US unemployment rate unexpectedly jumped to 10.2 per cent in October. While doubts about an economic recovery boosted gold, base metals tanked as their demand outlook was dented. Gold still enjoyed the prospects of central banks buying the yellow metal to diversify reserves. Subsequent to the RBI’s announcement of buying 200 tonnes of gold from the IMF directly, gold prices rose sharply on expectations that other central banks, mainly China would follow suit. However, other central banks still consider gold to be a low yielding asset historically, despite its speculative and safe-haven appeal. The central bank’s move has certainly offset some selling by investors as gold tests record highs.

Comex gold futures moved in line with our expectations. Important support is now at $1,080 and breach of this level could trigger stops. As we have been maintaining a bullish view for some time based on the big picture charts, our view stands vindicated as gold prices tested $1,100 levels. As long as the crucial weekly support at $1,073 remains intact, we feel gold futures could again inch higher towards $1125 or even higher. The rally does not indicate any signs of exhaustion yet. Unexpected fall below $1,073 could trigger a corrective fall towards $1,025 or even lower towards $1,011. Only a deeper fall below $1,007 will indicate bearishness. Such a fall could take it lower towards $980 or even lower towards $928. Elliot wave analysis indicates a possible fifth wave move in progress. This has been confirmed on rise above $978. A potential fifth wave target lies at $1,100, which has been met. RSI is in the neutral zone now indicating that it is neither overbought nor oversold. However, signs of negative divergences are seen now. The averages in MACD are still above the zero line of the indicator indicating the bullish trend to be intact. Therefore, look for gold futures to test the resistances levels and then correct lower subsequently.

Supports are at $1083, $1,072 & $1,045. Resistances are at $1,100, $1,125 & $1,160.

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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