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Comex gold futures ended marginally higher after a volatile week. The President of US, Mr George W. Bush’s plan to give the US economy temporary tax cuts and other measures totalling about $150 billion failed to boost the gold market. Still, gold should benefit from flight-to-quality demand as other asset classes lag. A drop in physical buying from the top gold buyer, India, has also weighed on bullion, but bargain hunting and continued investment demand should boost prices in the near term.

Comex December gold futures corrected lower. A corrective fall has been due for sometime now. Prices took support near an important near-term support point at $867. Rise above $893 will rekindle bullish hopes again. However, failure to decisively cross the resistance at $901/02 could discourage bulls and a fall towards $850 levels or even lower towards $837 could follow. As mentioned in the previous update, as we crystal gaze further into 2008 and beyond, we believe there could be a potential for a rise towards $1,200 per troy ounce. However, sharp corrective falls will also take place as the leverages increase. We believe that the third wave could have ended at $732 and the fourth wave consolidation at $665, and the fifth wave in progress. There are still no signs of the end of fifth wave. 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 indicate bearishness. Therefore, expect gold to test the resistance levels and then correct lower subsequently. Supports are at $878, 867 & 854. Resistances are at $895, 902 & 915.

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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