Comex gold futures ended lower on Friday due to profit-taking after four days of gains but was on track for its biggest weekly gain in nearly two years on easing fears of an early end to the US monetary stimulus that has boosted bullion’s appeal as a hedge against inflation.
Federal Reserve chief Bernanke has suggested the bond purchases could last longer.
And minutes from a June Fed meeting showed officials were divided over when to end the stimulus.
India on Friday reported a 70 per cent drop in monthly gold and silver imports, with shipments down sharply in June from May.
India is the world’s largest gold consumer, accounting for roughly a third of global gold demand, and weaker demand is fundamentally not good for gold prices.
Comex gold futures moved according to expectations.
As mentioned the previous update, prices have to cross above $1,277 to hint that a stronger upward retracement might have started in order to correct the overdone conditions and positive divergence in the indicators.
Such a rise could be seen targeting $1,320 levels which could be a significant resistance to surpass in the medium-term.
Continuing bullish momentum suggests that dips could be held above $1,255-1,265 area for another push higher towards $1,315-1,325.
It has to fall below $1,250 to cause doubts about this mildly bullish expectation.
Favoured view expects supports mentioned above to hold for a push higher towards $1,320 levels in the coming week.
The wave counts need to be 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. RSI is in the neutral zone now indicating that it is neither oversold nor overbought.
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 the test the supports and the rise higher again.
Supports are at $1,265, $1,245 and $1,185 and resistances are at $1,298, $1,320 and $1,345.
(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.)