Comex gold futures ended flat on Friday, as investors remained hesitant to jump back into the market due to continued political and tax uncertainty despite the Fed announcing new accommodative measures. The markets will continue to follow news emanating from fiscal cliff talks in Washington. Lawmakers have until the end of the year to reach a compromise on budgetary issues. However, inaction would trigger huge spending cuts and new taxes that could slow growth and tip the US economy back into recession. As the global economy showed signs of recovering, the appetite for gold as a haven would recede and demand for industrial metals, including platinum and palladium, and to some extent silver would rise. Nevertheless, stimulus measures from central banks, which have kept up pressure on long-term interest rates while fuelling inflation concerns, have put gold on track for a 12th year of gains.
Comex gold futures are lower in view with expectations. As mentioned in the previous update, structures are turning weak and bearishness gaining momentum again. A daily close below $1,700 warns of a decline to $1,675 followed by $1,625 levels. Resistance in the $1,725-30 range seem to capping upside attempts in the near-term, and while it continues to in the coming week, a decline to above mentioned levels look likely in the coming sessions. A trigger for such a decline could be a daily close below $1,682. Only a close above $1,745 could hint at resumption in uptrend and cause doubts on our bearish view. Only if this important resistance is cleared in the near-term, then only prices could aim for the next psychological resistance at $1,795-1,800 levels. While there is short-term weakness, big picture structures remains strong and the long-term uptrend remains intact.
The wave counts are gradually hinting that a new impulse is in the offing. A possible corrective wave “C” has possibly ended at $1,523. As mentioned earlier update a corrective move in the form of wave A-B-C could have ended at $1,523. A new impulse has begun with a potential to test $2,025-30 levels in the form of a fifth wave move. A perfect confirmation of the same will be seen on a close above $1,785. However, move below $1,690 could hint that the broad corrective consolidation in form of an “A-B-C-D-E” is in progress. RSI is in the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD are below the zero line of the indicator hinting at bearishness.
Therefore, look for gold futures to test the support levels.
Supports are at $1,685, $1,670 and $1,627 and Resistances are at $1,725, $1,745 and $1,765.
(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.)