Date:08/10/2007 URL: http://www.thehindubusinessline.com/2007/10/08/stories/2007100850410700.htm

Back COMEX gold may correct lower

COMEX gold futures ended sharply higher on Friday despite a stronger-than-expected jobs report. The Labour Department reported that September non-farm payrolls rose 1,10,000, only slightly more than the expected 1,00,000 forecast.

However, the previously reported 4,000 decline for August was revised upward sharply to an 89,000 gain.

Good physical buying in India, the world’s largest consumer during the festival season is robust. A strong economy and a healthier rupee have augmented India’s buying power.

Gold buying by funds continued in the week to Tuesday as the large non-commercials’ net long positions hit a record high on the Comex.

COMEX December gold futures continues to rise in line with our expectations. Initial resistance is seen at $755. There are two scenarios unfolding now. The first, being a direct rise above $755 leading to a test of $773 or even higher.

The second scenario expects resistance in the $755 to cap for a decline towards $725 levels again. We favour a break above $755 to target the next important resistance at $773 from where we can expect a corrective decline to take place.

As mentioned in the previous update, the current rally looks set to test $780-800 levels. We believe that the third wave could have ended at $732 and the fourth wave consolidation to have ended, and the fifth wave has begun with potential targets at $780.

RSI is in the neutral zone indicating that it is neither overbought nor oversold. The averages in MACD are still above the zero line of the indicator suggesting bullishness to be intact. Only a cross-over below the zero line will be a clear bearish sign.

Therefore, expect gold futures to test the resistance levels and correct lower subsequently.

Supports are at $743, 738 and 731. Resistances are at $755, 765 and 780.

Gnanasekar 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.)