Gold & Silver

Gold to test support levels

Gnanasekaar T. | Updated on November 17, 2011


Comex gold ended lower on Friday, crashing through key technical supports, as investors shed riskier assets and bought the dollar on heightened concerns over Greek debt. The dollar gained almost 1 per cent for the week versus the euro on worries that Greece's parliament will not approve a package of austerity measures next week.

The US currency also strengthened after the Federal Reserve, earlier this week, offered no hope for additional monetary support. Gold has thrived on the expectation of an extended period of low US interest rates, and that placed non-yielding bullion in a better position to compete for investor cash against stocks or bonds.

Comex gold futures fell lower sharply breaking near-term support at $1,510.

As mentioned earlier, although there were positive indications for the rally to continue, possibility exists for a sharp decline as prices have failed to cross recent highs at $1,577. Fall below $1,510 has revived hopes of a decline towards $1,435-45 levels again.

Ideally, this level could hold any major attempts to decline.

Near-term support is also at $1,460-65 levels. Rallies to resistances at $1,510 followed by $1,535 could now cap upside attempts.

Favoured view now expects resistances to get capped for a decline to $1,435-45. Failure to hold support here has the possibility of taking prices even lower to $1,300 levels.

The wave counts we have been tracking expecting a final fifth wave have been negated.

Therefore, we will be forced to alter our wave counts again. However, we will wait till a trend reversal signal is generated in MACD, which will confirm a downtrend.

We will review these counts accordingly in the next update.

RSI is 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, indicating bullishness to be intact. Only a cross-over below the zero line in the indicator will now hint at a bearish trend reversal.

Therefore, look for gold futures to test the support levels.

Supports are at $1,495, $1,462 and $1,435.

Resistances are at $1,510, $1,535 and $1,545.

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 >

Published on June 26, 2011

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