Comex gold futures ended higher on Friday mostly on renewed investment interest amid weakness in equities markets. Bullion’s second day of sharp gains came as US stocks eased on Friday, extending a broad decline in the new year with major indexes on track to end the week lower. Strong Chinese physical demand and new positions initiated by funds related to new-year index rebalancing also helped lift gold to a weekly gain. However, the momentum is not expected to be sustained as once the rebalancing activity ends, markets will once again focus on Fed’s unwinding of the bullion-friendly stimulus measures. Huge decline in crude oil prices this week could pressure the precious metal in the coming week as more participants return next week following the recent holidays.
Comex gold futures moved against our expectations. Prices unexpectedly pulled back higher and took out some near-term resistances. As cautioned in the previous update, prices had to cross above $1,238 to lessen the chances of an expected decline. Also, the spike in the past few days have come in relatively thin volumes and therefore making it difficult to treat it as a sign of reversal. Big picture still remains weak and prices are expected to edge lower again. Downside targets lie between $1,125-50 levels in the coming months. We also believe such decline towards $1,100-1,125 could be a potential beginning for a long-term investment opportunity, considering the long-term trend which still looks healthy for gold. For the coming week, charts picture suggests further gains to $1,265-75 zone while supports in the $1,210-15 levels hold. A direct fall below $1,185 could once again open the downside for gold targeting above-mentioned levels.
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. With the present move failing near $1,435-40, we will go with wave “B” ending at $1,433 and a possible Wave “C” underway with targets near $1,125-45 or even lower to $1,045. RSI is in the neutral zone now indicating that it is neither oversold nor overbought. The averages in MACD are below the zero line of the indicator hinting at bearishness to be intact. Only a cross-over above the zero line could hint at bullishness again.
Therefore, look for gold futures to test the resistances initially and then decline .
Supports are at $1,215, 1,185 and 1,145. Resistances are at $1,255, 1,275 and 1,310.
(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. )