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Gold futures ended sharply higher on Friday as the dollar weakened, which boosted the appeal of precious metals as an alternative investment for it. Investment demand for exchange traded funds for bullion also reached a record. Possibility of interest rate cuts for the dollar and rates remaining firm in Europe, UK and Australia were seen bullish for precious metals. Adding fire to fuel was Friday’s jobs report, which raised speculation the housing slowdown and credit market turmoil are spilling into the broader economy.

COMEX December gold futures rose sharply higher in line with our overall expectations. A successful daily close above $698 lead to stops being triggered and a weekly close above $700 is also a bullish sign. Initial resistance will be seen at $718/720 followed by key resistance at the previous high of $732. Key support is now at $698 followed by $693. Failure to cross either of the resistance levels mentioned above could again see a move lower towards $675-680 levels. Indicators are also showing some corrective signs on the back of the recent spike. However, there are positive signs in the bigger picture, which could finally open the way for the test of the all-time high at $850. We believe that the third wave could have ended at $732 and the current move being a fourth wave consolidation and the fifth wave has begun with potential targets at $765. 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 and correct lower subsequently.

Supports are at $704, 698 and 693. Resistances are at $718, 732 and 750.

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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