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Gold futures ended marginally higher on Friday prompted by dollar weakness ahead of the federal reserve meeting in the coming week. Lower-than-expected inflation data have prompted investment funds to unwind some of the long positions. Inflation numbers, both the CPI and the PPI numbers that came out this week, showed that there wasn’t a big concern about inflation. Also, the recent strength of the US currency has also weighed down on dollar hedge buying in gold, sen ding the metal’s prices falling from a three-month high above $990. Meanwhile, precious metals markets ignored news that the US Senate on Thursday approved a bill that supports a planned sale of 400 tonnes (12.97 million ounces) of gold by the International Monetary Fund.

Comex August gold futures tested the supports according to our expectations. As mentioned in the previous update, we still view the price structures to be positive as long as $915 remains undisturbed. As expected, we are still in a consolidation in the $925-964 zone. Only a break of this zone could provide direction in the near-term. However, unexpected fall below $921 followed by crucial support at $915 could dent our bullish expectations. And such a fall has the potential to drag prices even lower towards $865 levels again. We believe that the third wave could have ended at $1,033 and the fourth wave that we have been tracking could have ended at $681 and fifth wave impulse in progress. A daily close above $1,000 is a confirmation of the same. The RSI is in the neutral zone now, indicating that it is neither overbought nor oversold. The averages in MACD are above the zero line of the indicator again, suggesting bullishness to be intact. Only a cross-over below the zero line of the indicator could signal bearishness again. Therefore, expect gold futures to test the support levels and then rise higher again.

Supports are at $926, 915 & 895. Resistances are at $945, 957 & 978.

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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