Gnanasekar T.

Gold futures ended higher ahead of a Good Friday holiday weekend. Gold will draw support from a weaker dollar outlook and good physical demand from the largest consumer India, as the seasonal demand picks up rapidly. Though the release of Britons in Iran might reduce the safe-haven premium for gold, renewed interest from funds for base metals and precious metals is expected to keep prices underpinned. Overall gold is expected to make new highs this year owing to a weaker dollar outlook due to slowdown in the US economy and geo-political tensions.

COMEX gold futures moved perfectly in line with our expectations breaking out higher. Gold futures broke out of the $660-673 range and came to close to testing a near-term resistance point at $685. Strong resistance will be noticed at $688-90 levels being a trend line resistance point.

Break of $691 will open the way for a test of the 2006 high at $732 or even higher. Failure to break $689-90 could again lead to a fall back to the $650 levels. Favoured view expects a break of the resistance at $689-90.

We believe that the third wave could have ended at $732 and the recent fall has once again created doubts on whether a fifth wave impulse has begun or not. In this case, we could still be in a messy fourth wave move, and a break above $692 can only confirm the beginning of a fifth wave impulse.

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. Prices are above the short-term 8-day period EMA at $666 followed by the 34-day period EMA at $639. Therefore, expect gold to rise higher.

Supports are at $672, 666 and 658. Resistances are at $682, 689 and 695.

© Copyright 2000 - 2009 The Hindu Business Line