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Comex gold futures ended sharply higher on Friday as record high oil prices stirred inflation fears amid tumbling stock markets, driving equity investors to seek returns from commodities.

Rising energy prices boost gold’s appeal as a hedge against inflation, while a weaker dollar makes the metal an attractive alternative investment. A sudden resurgence in gold appears to have revived its positive correlation with oil.

Comex August gold futures seesawed and finally broke out higher. 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 at $921 has been broken and the next important resistance is at $938/40 subsequently. This should be a formidable level to surpass in the near-term and a successful close above this level should indicate a clear bullish reversal for gold, brightening the chances for a test of the four-figure mark again.

We believe that the third wave could have ended at $1033 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 have gone above the zero line of the indicator, suggesting a bullish reversal. Therefore, expect gold to test the resistance levels.

Supports are at $921, 910 & 897. Resistances are at $938, 955 & 964.

(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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