Comex gold futures ended higher on Friday, as optimism about European plans to contain the region's debt crisis and a dollar drop lifted bullion along with other riskier assets. Strong US retail sales and corporate earnings, helped prompt the traditionally safe-haven metal to move in tandem with equities.
Also, French and German officials are trying to finalise a crisis resolution plan at this weekend's G20 meeting in Paris. Also supporting was news that China's inflation dipped, easing worries of further tightening.
Gold-backed exchange-traded funds showed no major changes in the metals, suggesting strong investment demand and long-term prospects continuing to be good.
Comex gold futures moved in a broad range. Prices have inched up above near-term resistances at $1685-1,695 levels. As mentioned in the previous updates, an unexpected rise above $1,690 could change the picture to neutral from bearish. Resistance levels shift to $1,705/1,715 for the week.
A push above this band is needed to hint that price could rise further towards $1,765 or more ideally towards $1,805. Favoured view continues to expect that the upside attempts could fail near the resistance band around $1,705/1,715 for a decline towards $1,625. The decline could go as low as $1,500 being a trend line support point or even lower towards $1,455 being a Fibonacci retracement point.
The wave counts have to be revisited again as a possible fifth has ended. Potential targets for the fifth wave have already been met.
Prices have gone above $1,900 as an extension of the fifth wave. Fall below $1,600 confirmed that a corrective “A-B-C” has started. The RSI is still in the neutral zone now indicating that it is neither overbought nor oversold. As mentioned earlier, negative divergence here warns of a strong decline ahead.
The averages in MACD are below the zero line of the indicator hinting at bearishness to be intact.
Only a cross-over above the zero line in the indicator again will signal the resumption of bullish trend.
Therefore, look for gold futures to consolidate and then rise higher again. Supports are at $1,625, $1585 and $1,500. Resistances are at $1,675, $1,700 and $1,730.
(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 .)