Comex gold futures ended higher on Friday, as market participants waited for US data that might provide hints before next week’s Federal Reserve meeting. The Fed’s bond buying is tantamount to printing money and a pull back in the scheme would hurt gold’s appeal as a hedge against inflation. In a recent indication of economic recovery, data showed US retail sales rose more than expected in May and first-time applications for unemployment benefits fell last week, which could prompt the Fed to start winding down its stimulus.
Meanwhile, the latest measures taken by the Indian government and central bank to curb gold imports appear to be having the desired effect as imports in the second half of May decreased sharply. Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.63 per cent to 1,003.53 tonnes on Thursday -- their lowest since February 2009.
Comex gold futures are consolidating and moving with a bearish bias. As mentioned in the previous update, prices are indicating an inclination to fall towards $1,355/1,345 area. Prices found some support in the $1,365 itself. It appears more probable that resistance near $1,410/1,415 could cap upticks for next decline towards $1,335/1,325 region in the coming week. Unexpected recovery past $1,430 would kindle hopes of a slightly stronger recovery towards $1,475. Resistance near $1,410-1,424 could cap upticks initially. However, a fall below $1,365 could accelerate the decline further towards $1,320 or even lower to $1,285 levels.
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 test resistances and then decline .
Supports are at $1,365, $1,345 and $1,310 and Resistances are at $1,398, $1,420 and $1,445.
Gnanasekaar T.
(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 .)