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Comex gold futures ended lower on Friday due to profit-taking in a volatile week when prices had risen toward a high of $1,025.80 an ounce as a steadily falling dollar boosted investment demand. On the face of it, the case for investing in gold looks compelling on a number of fronts on a longer-term basis. The dollar is seen weakening further, and heightening its appeal as an alternative asset. However, physical jewellery buying, which typically accounts for more than half of the total gold demand, has been lagging due to near-record-high prices. Even flows into exchange traded funds, the beneficiary of gold buying earlier in the year, have not kept pace with the latest price surge. The ultra-stretched long speculative positions on the New York futures market could result in further profit-taking. Comex gold futures moved perfectly in line with our expectations. We have been maintaining a bullish view for some time based on the big picture charts. Corrective decline towards $995 or even $985 could precede next rally towards $1,050. Unexpected dip below $983 would hint at weakness and cause doubts about this bullish view. Such a drop could pull the price to the upper border of the triangle from which it had broken out. Such support is at $975. Only below this the chart might turn bearish. Therefore, favoured view still expects a test of $1,050 or even higher as long as support levels hold. Elliot wave analysis indicates a possible fifth wave move in progress. This has been confirmed above $978. A potential fifth wave target lies at $1,100. RSI is in 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 the bullish trend to be intact. Therefore, look for gold futures to test the support levels and then rise higher again.

Supports are at $995, $985 and $974. Resistances are at $1,021, $1,035 and $1,078.

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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