The Hindu Business Line : Gold futures could rise

Gold futures rallied higher on Friday boosted by a weaker dollar and fund buying, again giving rise to hopes for a test of the psychological resistance at $700. The dollar fell against the euro after a report showed that US payrolls growth for April was the lowest since November 2004 and weaker than economists' expectations.

Strength in base metals such as copper also lent support to gold futures. Markets are also keenly watching the Peru labour situation in the mines, because it is among the world's top two silver producers and is the No. 3 copper and zinc miner, as well as the No. 5 gold producer.

COMEX gold futures rose higher smartly breaking key resistance points without any problems. Resistance will now be seen at $695 followed by $698, which could be a heavy region with buy-stops. Dips to $685 levels will now attract buying interest.

A bullish pattern followed by a moving average cross-over and other positive indications makes us believe we could possibly see a rise above psychological resistance at $700 in the coming sessions. As mentioned in the previous update, though there are several negative indications, a move above the recent high of $698 will again rekindle hopes of a test of $732 in the coming sessions.

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 $698. 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 bullishness.

Prices are above the short-term 8-day period EMA at $681.75 indicating bullish strength followed by the 21-day period EMA at $682. Therefore, expect gold futures to rise higher.

Supports are at $685, 678 and 671. Resistances are at $695, 698 and 705.

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