Comex gold to test support, rise

Comex gold futures rebounded higher on Friday, on short-covering and physical buying interest emerging at lower levels.

Investors pulled $5.6 billion from gold exchange-traded products (ETPs) in February after poor performance by the yellow metal.

Holdings of SPDR Gold Trust, the world’s biggest gold-backed exchange-traded fund, fell 1.805 tonnes to 1,243.05 tonnes on March 7.

On Friday, the Labour Department said the US economy added 2,36,000 jobs in February, well above economists’ expectations for a rise of 1,60,000.

The unemployment rate fell to 7.7 per cent, from 7.9 per cent.

The US central bank has said it would keep interest rates low until the rate falls to 6.5 per cent.

Though gold prices are finding support on and off due to bargain hunting interest, the outlook in the near-term still remains cloudy.

Comex gold futures are moving in line with our expectations.

As mentioned in the previous update, prices are inclined to test supports near $1,535-40 range or even lower to $1,525, which is very critical for the sustenance of the long-term bullish trend in gold.

Momentum suggest that prices could edge lower towards $1,545-50 levels or even lower and then find an intermediate bottom there, for a retracement higher towards $1,595-1,625 levels.

In the bigger and long-term picture prices are still in a broad consolidation after reaching all-time highs at $1,920. There is a good chance of prices testing $2,200-2,300 in 2013 while $1,520-25 remains undisturbed on the downside.

In the coming week, we expect prices to find support in the $1,535-45 range or, a direct rise above $1,589 could see prices bouncing back higher again.

All possible scenarios have been discussed above as the near-term direction remains mixed. Favoured view expects prices to find support near the levels mentioned above and bounce higher from there.

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, a move below $1,690 has increased the possibility that the broad corrective consolidation in form of an “A-B-C-D-E” is in progress now.

RSI is in the neutral zone now indicating that it is neither overbought nor oversold.

The averages in MACD are still below the zero line of the indicator hinting at bearishness to be intact.

Therefore, look for gold futures to test the supports and rise again.

Supports are at $1,555, $1,525 & 1,470 and resistances are at $1,595, $1,625 & $1,645.

(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.)