The Hindu Business Line : Gold futures may test support level

Gold futures settled lower on Friday due to a stronger dollar and soft crude oil prices. Fund liquidation was seen across the board on all commodities, as the dollar staged a smart rally.

Worries that the Federal Reserve may not be done with its two-year tightening cycle supported the dollar, which was bearish for gold as a favoured alternative to the dollar.

Talks of central bank selling of gold also kept prices pressured. Central banks with an agreement to limit their annual gold sales still have sizeable amounts of gold to dispose of before late September.

COMEX gold futures failed to follow-through higher and broke some crucial supports in the process threatening to edge lower further.

Good support will be seen at $613-15 levels and an unexpected break below $602 could see prices testing the long-term trend line support point at $585 levels in the coming week.

In the bigger picture, important trend line support lies at $575-78 levels and as long as this level is not broken, we are still hopeful of seeing new highs before the year-end.

We believe that the third wave could have ended at $732 and the corrective fourth wave possibly ended at $546.

Currently we could be in a corrective move within the fifth wave.

It could also become an irregular wave "B" if prices fail to go above $680 and subsequently dip below $575. RSI is in the neutral zone indicating that it is neither overbought nor oversold. The averages in MACD are below the zero line of the indicator suggesting bearishness.

Only a crossover of the averages above the zero line will signal a bullish reversal. Prices are above the short-term 8-day period EMA at $629 indicating short-term bullishness followed by the 34-day period EMA at $633. Therefore, look for COMEX gold to test the support levels in the coming week.

Supports are at $613, 602 and 594. Resistances are at 4625, 633 and 645.

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