Comex gold futures ended lower on Thursday, on profit-booking as brighter economic data and stronger equities bolstered investor risk appetite. Ideally, recent developments in the Korean peninsula should be supportive for gold as a haven. The coming weeks will determine, market’s inclination to move to safety of gold or dollar as a safe-haven. Failure to attract haven buying could dent bullion’s appeal further. Worries about the fiscal stability of the euro zone had sent gold prices to a 1-month high last week. Presently, there are many factors favouring gold prices to rise higher, but it has not shown the same momentum it did during euro zone crisis when prices touched its all-time highs. The record-breaking run up in equities had cast a shadow on gold in recent months, as investors pulled money out of the haven asset in favour of the economically sensitive stock market.
Comex gold futures are in a consolidation and stuck in a broad range. The lower end of the $1,585-90 range seems to be supportive presently. Fall below $1,580 could hint at weakness. There are no clear indications of a trend either ways. Once above $1,620, prices could start getting stronger aiming for $1,645 followed by $1,685 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 very good chance of a test of $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 $1,580-85 range and move higher towards $1,625 or even higher to $1,645. However, a fall below $1,574 could revive bearish expectations of a test of $1,525 or even lower. 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.
Supports are at $1,585, 1,574 and 1,545 and Resistances are at $1,625, 1,645 and 1,685.
(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.)