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Comex gold futures ended slightly higher on Friday, off its day’s highs, as market participants booked profits ahead of a weekend. Gain in energy cost and a weaker dollar sparked demand for gold as a hedge against inflation.

The dollar is down 1.5 per cent this week against a basket of six major currencies, and crude oil rebounded after tumbling 3.5 per cent on June 18. With the dollar remaining broadly weak, the outlook for interest rates uncertain, and inflation on the rise, markets remain broadly positive towards the long-term outlook for gold.

Comex August gold futures recovered quite well from its recent lows. Gold prices have been fluctuating on both sides. The bias has been changing constantly from bullish to bearish, week-after-week, indicating volatile conditions. Important resistance is at $910/12 levels now followed by $921.

A direct rise above $921 will then bring in the next important resistance at $930 levels. The bias is now bullish as long as $880 levels hold. We believe that the third wave could have ended at $1,033 and the fourth wave is in progress right now. We could now be tracking a wave four A-B-C in progress and once the correction ends, a potential fifth wave impulse could be in the making. Only a rise above $955 would confirm this view. The RSI is in the neutral zone, indicating that it is neither overbought nor oversold.

The averages in MACD are still below the zero line of the indicator, suggesting a bearish reversal. Only a cross-over above the zero line will now restore confidence for bullishness ahead. Therefore, expect gold to test the resistance levels.

Supports are at $895, 880 & 871. Resistances are at $912, 921 & 930.

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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