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Gnanasekar T.

Gold futures ended lower on Friday in a volatile week, which saw prices hitting a new high for 2007, before falling due to fund liquidation. The entire metals complex was weak on growth and inventory concerns. A reversal in the dollar strength was also another reason for the sell-off on Friday in gold and silver. News that US has no plans to go to war the Iran added fuel to bearishness and intensified fund liquidation. Gold prices usually rise with geopolitical tensions because of the precious metal's safe-haven appeal.

Near-term support is at $643 followed by important support at $635 levels. 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.

Prices are above the short-term 8-day period EMA at $651 followed by the 34-day period EMA at $637. Therefore, expect gold to test support levels and then rise higher subsequently. Supports are at $643, 638 and 635. Resistances are at $655, 658 and 667.

(The author is a director at Commtrendz Research and 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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