The Hindu Business Line : Gold may pull back higher

Gold futures dropped two per cent on Friday, as a rallying dollar and weaker base metals triggered heavy selling by funds ahead of the weekend. Initial bullishness for gold and silver were replaced by heavy fund selling after inflation data looked quite tame.

A bullish stock market too resulted in money moving from other assets like commodities back into equities. Clearly, gold is now bogged down by rising equities to the extent that it has even ignored a rally in crude oil prices. Gold will be pressured in the coming weeks till it finds renewed buying interest at lower levels.

COMEX gold futures fell lower in line with our expectations. As mentioned in the previous update, prices consolidated in the $628-636 range and fell lower. Support is expected now at $610-611 levels followed by crucial support at $601.50 levels. Fall below $601 will have the potential to extend lower till $576-78 levels being the long-term rising trend line support point as seen in the chart above.

Favoured view is to look for support at $610 levels to hold for a pullback to $627-28 levels in the coming week. We believe that the third wave could have ended at $732 and the corrective fourth wave still in motion. Break above $678 will signal the beginning of the fifth wave move. 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 crossover of the averages below the zero line will signal bearishness again. Prices are below the short-term 8-day period EMA at $631 followed by the 34-day period EMA at $628. Therefore, look for COMEX gold to test the support levels and pullback higher. Supports are at $615, 610 and 601. Resistances are at $627, 633 and 638.

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