The Hindu Business Line : Gold may rise, test resistance

Gold futures ended sharply higher on Friday with a lot of volatility seen in during the week. Proposals for a physically backed ETF for platinum a member of the bullion complex boosted interest among investors, as it took more metals off the market.

Gold ETFs have accumulated approximately more than 650 tonnes of gold so far, while silver funds have about 4,200 tonnes. The only worrying factor is, gold has still not gathered the momentum to surpass the psychological mark of $700.

COMEX gold futures rose higher after dipping to support levels during the week. Prices have broken out of the trend line resistance point at $693-94 levels. It is expected to take a shy at the recent high at $732 or even higher. As mentioned in the previous update, the bigger picture indicates a possible rise to $875 in the coming months. Though it looks ambitious now, the technical pattern indicates this possibility and only a move below $661 will cast doubts on this expectation.

Alternatively, failure to surpass $698 a recent high made in February and a further fall below $681 will postpone the big move temporarily, leading to another round of consolidation before taking out the recent high. We believe that the third wave could have ended at $732 and the current move being a fourth wave consolidation and the beginning of a fifth wave impulse will be confirmed above $695.

RSI is in the neutral zone indicating that it is neither overbought nor oversold. The averages in MACD have are above the zero line of the indicator suggesting bullishness. Prices are above the short-term 8-day period EMA at $687 followed by the 21-day period EMA at $681. Therefore, expect gold futures to rise higher and test the resistance levels.

Supports are at $690, 684 and 678. Resistances are at $698, 715 and 732.

(The author is the director of 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.)

Gnanasekar T.

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