The Hindu Business Line : Signs still bullish in gold

Gold futures ended sharply higher on Friday on firmer stock markets and a strike at a gold mine, and as speeches by the US President, Mr George W. Bush, and the Federal Reserve calmed financial markets ahead of the Labor Day holiday long weekend.

Meanwhile, the Federal Reserve Chairman, Mr Ben Bernanke, said that the US central bank will take the necessary steps to shelter the economy from turmoil in the financial markets but will not bail out investors who made mistakes lending support to gold.

COMEX December gold futures rose higher in line with our expectations. As mentioned in the previous update, a move above $687 could rekindle bullish hope.

Strong resistance will be noticed in the $688-93 zone. A successful daily close above this zone is expected to open the way for a test of $700 or even higher. The resistance zone mentioned above also happens to be a trend line resistance point as seen in the chart above.

However, failure to cross this zone could again lead to a consolidation with the $650 zone offering good support again. 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 still above the zero line of the indicator suggesting bullishness to be intact.

Only a cross-over below the zero line will be a clear bearish sign. Therefore, expect gold futures to test the resistance levels.

Supports are at $678, 672 and 666. Resistances are at $688, 693 and 702.

Gnanasekar T.

(The author is the Director of Commtrendz Research and also 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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