Gold to test resistance levels

Comex gold futures ended higher on Friday, as the dollar's slump spurred demand for bullion. Meanwhile, a steep decline in pending sales of existing US homes provided gold with added safe-haven appeal.

Bullion priced in euros and British pounds climbed to records this week as European policy makers seek ways to restore investor confidence amid increasing concern that Greece won't be able to repay its debts.

Gold's appeal has been boosted in recent weeks by worries about debt contagion spreading from Greece to Ireland, Portugal and Spain.

Interest in gold ETFs remains unabated. That is not the case with silver ETFs, whose holdings have fallen nearly 9 million ounces this week, bringing year-to-date outflows to 42.79 million ounces or 8.4 per cent.

Comex gold futures are moving in line with our expectations.

As mentioned in the previous update an unexpected rise above $1,530-35 could force us to abandon our bearish view. Direct rise above $1,527 has now hinted at bullishness for $1,577 or even higher towards $1,595.

A gradual rise towards $1,577 can be seen during the week now.

Supports are at $1,525 followed by $1,510 now. Potential trend channel resistance is at $1,605-10, as seen in the chart above.

Only a fall below $1,510 could revive hopes of a decline towards $1,445 levels again.

Favoured view now expects any decline to $1,510-25 to hold well for a rise to new highs above $1,577.

Our wave counts are now hinting at a final fifth wave to have begun. As we have been maintaining there is a possibility of the fifth wave to continue rising higher above $1,577 towards $1,600 levels.

Therefore, we have modified our previous wave counts of a possible wave “A” which ended at $1,505.

As mentioned in the previous update, a bullish reversal has been confirmed on a daily close above $1,530.

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.

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

Supports are at $1,525, $1,510 and $1,485.

Resistances are at $1,555, $1,578 and $1,605.

(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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