Comex gold futures ended marginally lower on Friday, and are likely to remain pinned within a narrow range until fresh news emerges from the fiscal cliff talks in Washington.
Worries about the approach of the fiscal cliff have had a mixed effect on the gold market. Failure to clinch a deal in the US would likely spur haven buying of bullion, but since many investors have both risky assets like equities in their portfolios, the metal may also track stock markets higher/lower if the White House and Congress finally reach or don’t reach an agreement. Either ways, upside for gold in the short-term could be limited.
Comex gold futures are stuck in a narrow range. As mentioned in the previous update, a minor pullback is seen from $1,635 levels, and prices could extend towards $1,685-90 on the upside where it could find strong resistance in the coming sessions. Prices have not been able to cross $1,670 so far.
Possibility of a pullback to $1,685-1,700 looks likely in the coming week while $1,635 holds. Direct fall below $1,635 could drag prices initially lower towards $1,625 an important support level and failure to hold support here could further drag it lower to $1,565-75 levels.
Our favoured view expects prices to find a possible intermediate bottom near $1,565-75 range.
In the bigger picture prices are still in a broad consolidation after reaching all-time highs at $1,920. We still believe prices could test $2,200-2,300 in 2013 while $1,520-25 remains undisturbed on the downside.
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 below the zero line of the indicator hinting at bearishness.
Therefore, look for gold futures to test resistances initially and then decline lower again.
Supports are at $1,645, $1,625 and $1,575 and Resistances are at $1,675, $1,700 and $1,745.
(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.)