Comex gold futures ended higher on Friday near two-month highs supported by geo-political tension in Egypt and a strong demand from China, and was headed for its best weekly gain in over a month on technical buying and inflows into the world’s biggest gold exchange-traded fund. However, economic data from the US continues to be robust.

The number of Americans filing new claims for jobless benefits fell to a near six-year low last week and consumer prices rose broadly in July, which could draw the Federal Reserve closer to trimming its massive bond-buying programme which could curtail bullion’s rally.

The recent measures by the Indian Government have the potential to reduce India’s gold demand, a potential negative for gold prices.

Going forward due to a stronger dollar on the back of the Fed tapering, any rallies in gold could be short-lived unless geo-political situation worsens more and provides further support for gold.

Comex gold futures rose higher in line with our expectations. Prices have finally broken above the narrow range it has been moving over the past few weeks.

Bearish trend indicators are in withdrawal mode and this could allow for further recovery.

Push above $1,380 could open the possibility of further recovery towards $1,390-1,395 being a falling trendline resistance point, or even higher to $1,425 area.

Supports are noted around $1,365 levels. Indicators have turned friendly and the trend could continue towards resistance levels. Favoured view expects supports to hold for a push above $1,390-95 levels in the coming sessions.

Unexpected fall below $1,355 would be the first warning sign of a potential weakness that could botch up this mildly bullish setup.

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 $1,155. There is a possibility that wave ‘C’ has ended at the recent low at $1,180. Will wait for a confirmation before calling for a new impulse. RSI is in the neutral zone now indicating that it is neither oversold nor overbought. The averages in MACD have gone above the zero line of the indicator hinting at a possible bullish reversal.

Therefore, look for gold futures to consolidate and test the resistances. Supports are at $1,365, $1,350 and $1,285 and resistances are at $1,395, $1,425 and $1,470.

(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.)

Related Topics