The Hindu Business Line : Gold may test resistance

COMEX gold futures ended the week lower on profit-taking coupled with a resurgence in the dollar. With the European Central Bank’s interest rate decision and US non-farm payroll data out of the way, gold could soften a little more on follow-through selling, however given the inflation pressure, markets will continue to buy into hard assets like gold. Given the continuous string of new record highs for oil and signs of credit market stress, gold is well placed to chal lenge resistance at the $950/oz level next week.

COMEX August gold futures tested the resistance levels as expected. However, it failed to convincingly rise above $950 levels resulting in a sell-off. Supports are now at $923 followed by crucial support at $915. Ideally, supports should hold and edge higher towards $950 and break higher subsequently. An unexpected fall below $ 915 could change the picture to neutral for gold.

We believe that the third wave could have ended at $1033 and the fourth wave 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. 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 $923, 915 and 897. Resistances are at $938, 955 and 964.

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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