Gold futures, ended higher on Friday as equities tumbled worldwide, boosting demand for the precious metal as a safe-haven. Gold is expected to fare better than other commodities as a global slowdown reduces demand for raw materials. There are many possible reasons for the slide in gold prices, including the suddenly firmer dollar, because gold is priced in dollar terms. Some financial institutions are unwinding commodities bets as they reduce leverage and shore up capital . India, a big consumer of gold, recently has shown signs of sluggish buying as the rupee depreciated against the dollar, making gold more expensive for Indian jewellery makers.

Comex December gold futures fell much more than our expectations. As expected we saw the lows at $730 being tested and went below even $700 easily. An important support near $680 has possibly provided a near-term base. A wave equality target at $690 has been achieved.

A good bounce from lows at $680 gives hope for a pullback towards $753 or even higher towards $775 levels for the coming week as long as $680 holds. However, a fall below $680 could take prices lower towards $ 635 levels. We believe that the third wave could have ended at $1,033 and the fourth wave that we have been tracking could still be in formation and not ended as expected in the previous update.

Indicators are still displaying positive divergences, where prices are making a lower low not confirmed by a lower low in the indicator, a sign of a bullish turnaround. The RSI is in the neutral zone, indicating that it is neither overbought nor oversold. The averages in MACD have gone below the zero line of the indicator, suggesting a bearish reversal. Only a cross-over above the zero line of the indicator could signal a bullish reversal again. Therefore, expect gold futures to test the resistance levels.

Supports are at $715, 705 & 680. Resistances are at $745, 756 & 775.

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.)

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