Comex gold futures ended higher after hitting multi-year lows on Friday, on end-of-quarter short-covering, but bullion still posted its largest quarterly loss in at least 45 years due to selling amid fears that the US Federal Reserve may wind down its stimulus programme and flight of capital from safe-haven gold into equities.
Gold fell 23 per cent during the three months ended in June, the weakest performance since the US government suspended the convertibility of dollars to gold in 1971.
Before that, global gold prices were pegged to the dollar, and earlier to the British pound.
After a spectacular surge in physical demand after a $200 two-day dive in April, jewellers and consumers across the world are reluctant to buy even after the latest price decline.
Meanwhile, recent moves by the Indian Government to clamp down on gold imports, meant to curb a wide trade deficit, are also hurting demand.
Comex gold futures moved lower as expected. As mentioned in the previous update, the structure in the daily chart showed projected objectives falling between $1,245 and $1,225.
Prices stretched even further towards $1,179.
A strong pullback from the lows of $1,179 to $1,235 looks impressive and hints at a possible intermediate bottom.
However, a clear reversal from here is yet to be confirmed.
The retracement could continue higher towards $1,265 initially. Though the view is still bearish for a fall towards $1,155-65 range, unexpected rise above $1,278 would be hinting at a stronger corrective rise.
Such a rise could be seen targeting $1,320 levels which could be a significant resistance to surpass.
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” has begun from $1,920, and ended at $1,527. Wave “B” begun from $1,527 ended at $1,798. Wave “C” has begun from there.
Projected targeted for the wave “C” is at now at $1,225-1,245. RSI is in the oversold zone now indicating that it is oversold and a possible upward correction in the offing. 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 resistances and then decline again.
Supports are at $1,205, $1,185 and $1,155 and resistances are at $1,245, $1,265 & $1,320.
(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.)