Comex gold futures ended higher on Friday, supported by a drop in stock markets and comments from a Federal Reserve official that dampened the talk that the US central bank is set to curb monetary stimulus.
Speculation the Fed would scale back its monetary easing programme threatened to weigh on gold this week after Fed Chairman Ben Bernanke said it could start scaling back its $85 billion in monthly bond purchases in the next few meetings. However, ETF’s continue to see fresh outflows.
The SPDR Gold Trust, the world’s largest gold-backed ETF, reported at the close of Thursday that its holdings had fallen by another 1.5 tonnes, bringing its total outflow for the week to 19.8 tonnes. Despite the recent outflows which is equal to more than half of the entire production, prices have held well sue to strong retail demand for coins and jewellery. Comex gold futures are seen consolidating after almost retesting recent lows. Prices have shown resilience despite all negative factors surrounding it presently. This could hint that we could have most probably seen an intermediate bottom. However, a clear confirmation of the same can be got on a daily close above $1,490.
As illustrated earlier, several indicators suggest gold is already in the final stages of a bear market. A 38.2 per cent pullback from its 2011 peak at $1,923 would be close to $1,280-85 and a 50 per cent retracement of a rally that began in 2008 would be close to $1,300-02.
This week, prices could consolidate and inch higher gradually while $1,345-50 holds attempts to decline. Resistance points are lying near $1,395-1,415 and a stronger one near $1,440. It has to rise above $1,450 to cause some uncertainties and revive bullish hopes again, opening the way for a test of $1,510 or even higher.
The wave counts need to be reviewed once again. As mentioned earlier, a possible corrective wave “C” has ended at $1,523 and a possible new impulse has begun with a potential to test $2,025-30 levels in the form of a fifth wave move. However, a move below $1,690 has increased the possibility that the broad corrective consolidation is in progress now and the impulse has been converted to a corrective move in the form of a wave “C”.
Wave “A” begun from $1,920, and ended at $1,527. Wave “B” begun from $1,527 and ended at $1,798. Wave “C” has begun from there.
Projected target for the wave “C” is now at $1,265-1,300.
RSI is in the still 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 consolidate and then rise again.
Supports are at $1,370, $1,350 & $1,310 and resistances are at $1,395, $1,440 & $1,485.
(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 .)