Gold futures ended sharply lower on Friday as the dollar rebounded and oil futures declined as global recession curbed demand decreasing the precious metal’s allure as a hedge against inflation. The recessionary fears are yet to show any signs of abatement and, therefore, the dollar should be under pressure. Moreover, the monetary easing underway could lead to serious inflationary pressures going forward which increases the metal’s appeal as an inflationary hed ge. However, near-term deflationary concerns will continue to hamper the demand and gold would tend to move closely with dollar, inversely.
Comex December gold futures moved perfectly in line with our expectations. As expected, we saw a rise above $875, but prices could not sustain at those levels leading to a sharp fall subsequently. As the year comes to a close, we can expect a thin market going forward and along with some exaggerated moves on both sides. Very important support is at $809 now and as long as this level remains undisturbed, there are good chances of this bullishness to remain and probe the higher side.
Unexpected fall below $807/09 could trigger weakness and such a fall could take prices lower again towards $750 levels, which we do not favour. 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 earlier updates. The 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 again, suggesting a possible bullish reversal. Only a cross-over below the zero line of the indicator could signal bearishness. Therefore, expect gold futures to test the support levels.
Supports are at $824, 810 & 789. Resistances are at $845, 854 & 865