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Gnanasekar T.

Gold futures ended sharply higher on Friday, after the dollar sank to its lowest level against the euro. The dollar sank to a 1-1/2-year low against the euro as worries flared over the strength of the US economy and central banks diversifying reserves into other asset classes.

Gold is emerging as a credible alternative to holding dollars and therefore has been benefited by last week's moves in the dollar, despite crude oil prices falling lower on warmer than expected winter and high inventory levels.

COMEX gold futures moved on expected lines. As expected, gold futures rose higher after consolidating in a narrow range. Important near-term resistance is at $648-50 followed by the next important resistance at $668 levels. Strong support will be noticed in the $633-35 range immediately and only a close below $628.5 will hint at a premature end to the current rally correcting further lower.

As the underlying trend remains strongly bullish and the technical picture well set for a rally, we do not favour a major fall reversing the trend. It is ideal to use corrective dips as an opportunity for investment. We believe that the third wave could have ended at $732 and the corrective fourth wave still in motion.

Break above $678 will signal the beginning of the fifth wave move. 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 suggesting a bullish reversal. Only a crossover of the averages below the zero line will signal bearishness again.

Prices are below the short-term 8 period EMA at $629 followed by the 34 period EMA at $617. Therefore, look for COMEX gold to rise.

Supports are at $631, 628 and 624. Resistances are at $648, 655 and 668.

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