Comex gold futures rose higher on Friday hitting a one-month peak on Friday and looked set to end higher for a second straight week on hopes that weak US data would deter the Federal Reserve from scaling back its stimulus measures this year. Weak economic data is the ideal catalyst for precious metals to rally higher. Since then, a partial government shutdown and a weaker-than-expected September jobs report have sparked hopes that the central bank will delay scaling back its stimulus program till next year and that in-turn could drive inflation higher.

Comex gold futures pulled back higher against our expectations. As mentioned in the previous update, bear trend is showing signs of withdrawal and this might allow the price to rise generally towards nearby resistance area at $1,350/55 for the week. Favoured view expects a rise towards nearer weekly resistance at $1,366 followed by stronger resistance at $1,375. However, the trend indicators are still not convincingly bullish enough to suggest that it might attempt to cross $1,395-1,400. Supports are clustered around $1,345 followed by $1,330. It has to fall below $1,315 to hint that it might not rise as expected but could drift towards $1,300 or even lower.

The wave counts need to be reviewed once again. A failed fifth wave move at $1,800 resulted in a corrective decline to $1,181 in the form of wave “A”. A possible wave “B” is in progress with targets near $1,420 or even higher to $1,485. This means a wave “C” is expected to follow through which could target $1,150 or even lower. Alternatively, from the peak of $,1920 a corrective decline in the form of “A-B-C” is already over at $1,181 and a new impulse has begun. Confirmation of such an impulse will be seen at $1,535. With the present move failing near $1,435-40, we will go with wave “B” ending at $1,433 and a possible Wave “C” underway with targets near $1,145-50 or even lower to $1,100. RSI is in the neutral zone now indicating that it is neither oversold nor overbought. The averages in MACD are below the zero line of the indicator hinting at bearish to be intact. Only a cross-over above the zero line could hint at bullishness again.

Therefore, look for gold futures to test the resistance levels in the coming sessions.

Supports are at $1,345, 1,325 and 1,285 and resistances are at $1,375, 1,395 and 1,450.

(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.t@gmail.com.)

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