Gold futures may fall further

Comex gold futures ended higher on Friday, after the US data showing low inflation and improving consumer confidence dampened investor interest, with bullion notching sharp losses. Gold was also pressured on Friday by strength in the US dollar.

Gold prices reached their highest price since May 14, buoyed by demand for a refuge after a weak reading on the US growth and another big selloff in the Asian stock markets.

Gold prices cut their earlier losses briefly early on Friday after data showed the US consumer spending unexpectedly fell in April, easing for the first time in almost a year. Weaker US economic data could spur the Federal Reserve to hold its stimulus measures in place for longer, a potential boost to demand for gold as a refuge from inflation.

The US central bank’s bond-buying programs have been a key support for gold prices in recent years. But, the dollar strength will continue to pressure gold prices in the coming sessions.

Comex gold futures moved perfectly in line with our expectations. As mentioned the previous update, 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. As cautioned previously, resistance points are lying near $1,395-1,415 and a stronger one near $1,440.

Prices could not sustain beyond $1,421. The decline from there shows weakness and bearish tendencies. Fall below $1,365 could accelerate the decline further towards $1,320 or even lower to $1,285 levels. 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 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 targeted for the wave “C” is at 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 decline further.

Supports are at $1,365, $1,330 and $1,310 and resistances are at $1,410, $1,440 and $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.)