Comex gold futures ended higher on Friday near two-month highs after weaker US home sales data stoked hopes of sustained stimulus measures from the Federal Reserve.
Hedge funds and other money managers stepped up their net bet on higher gold prices by 30 per cent in the lead up to Wednesday’s FOMC minutes, weekly data from the CFTC showed.
The shift came amid hopes of a more dovish stance from the Fed on the path of future monetary policy.
Weaker economic data has fanned investor appetite for precious metals in recent weeks, as market participants hope the reports will prompt Fed officials to keep stimulus spending in place longer than expected.
Federal Reserve officials have repeatedly said they would start tapering their bond purchasing program later this year so long as economic growth remained on track.
Comex gold futures are higher in line with our expectations.
As mentioned in the previous update, bearish trend indicators are in withdrawal mode and this could allow for further recovery.
Push above $1,380 has opened the possibility of further recovery towards $1,420-1,425 being a falling trend line resistance point.
Supports near $1,380-1,385 could hold for a rise towards $1,420-25 or even higher to $1,475-85 levels.
It has to fall below $1,353 to cause doubts about this view as such a move could result in an overlap, weakening the case for a stronger rally.
Favoured view expects supports to hold for a rise towards $1,420-25 levels in the coming sessions while supports hold.
Unexpected fall below $1,362 could postpone the bullishness.
The wave counts need to be reviewed once again. A failed fifth wave move at $1,800 resulted in a corrective decline to $1,181 in the form of wave “A”.
A possible wave “B” is in progress with targets near $1,420 or even higher to $1,485. This means a wave “C” is expected to follow through which could target $1,150 or even lower.
Alternatively, from the peak of $1,920, a corrective decline in the form of “A-B-C” is already over at $1,181 and a new impulse has begun.
Confirmation of such an impulse will be seen at $1,535. 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 $1,380, $1,355 & $1,325 and resistances are at $1,400, $1,425 & $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.)