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Gnanasekar. T

Gold futures ended higher on Friday at a seven-week high due to safe-haven buying on the back of escalation of violence in the West Asia. Should the existing tensions evolve into a full blown one, gold stands poised to go higher along with rising crude oil prices.

Despite fits of profit-taking and selling due to a firm dollar, the market extended gains.

Rising dollar did not affect gold prices, as investors and funds stashed money in gold, which frequently benefits when energy prices are rising due to the metal's role as an inflation hedge.

COMEX gold futures corrected lower initially and then zoomed higher from there. While prices stay above $658/660, we see a rally towards $675 to $680 levels in the coming week. And an extension above $686 can trigger a rally towards $702.

However, failure to hold support at $658 can take prices lower to $648, from where the upward trend could resume and favour this outcome for the week.

We see $648 as a sensitive short-term support point and an unexpected break will see a sizeable correction lower unfold.

We believe that the third wave could have ended at $732 and the corrective fourth wave possibly ended at $546.

The current impulse shows signs of fifth wave in progress. It could also become a irregular wave B if prices fail to go above $680 and subsequently dip below $599, which we do not favour. RSI is in the neutral zone indicating that it is neither overbought nor oversold.

The averages in MACD are above the zero line of the indicator suggesting a bullish reversal. Prices are above the short-term 8-day period EMA at $643 indicating bullishness followed by the 34-day period EMA at $623. Therefore, look for COMEX gold test the resistance levels and then correct lower.

Supports are at $658, 648 and 635. Resistances are at $675, 686 and 702.

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