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Comex gold futures ended sharply higher on Friday, after the dollar tumbled to all-time lows against the major currencies.

Despite a rebound in the dollar towards the close and falling crude prices, gold did not give up its gains. No US economic data was released on Friday, but ongoing ideas that the Federal Reserve may cut interest rates again because of further sub-prim e and credit-market fallout weighed on the greenback.

Potential for supply disruptions in South Africa may also be a supportive factor, with the National Union of Mineworkers trying to organise a strike on December 4 over safety issues.

Comex December gold futures moved perfectly in line with our expectations.

As per our favoured view, $773 held well for the rally to resume higher again. There are two scenarios emerging now. The first one expects a consolidation in prices followed by a move towards $850 or even higher towards $865.

There is a potential for this move even to extend towards $875. The second scenario is a gradual rise above $850 from current levels. Risk for the view is a break below $803, which could dampen our bullish expectations. We believe that the third wave could have ended at $732 and the fourth wave consolidation at $665, and the fifth wave in progress.

RSI is in the neutral zone now 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 indicate bearishness. Therefore, expect gold futures to test the support levels and rise higher subsequently.

Supports are at $782, 773 & 748. Resistances are at $795, 815 and 832.

Gnanasekaar 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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