Comex gold futures ended marginally higher on Friday, on uncertainty about Fed policy, amid growing disappointment over gold’s performance.
Gold’s decline came amid increased competition from better performing equity markets and as investors worried about the exit of large fund managers such as George Soros from the bullion market.
Fed officials showed growing discomfort with the existing monetary policy, sparking worries that the central bank may tighten its easy-money measures sooner than expected.
As futures slumped to multi-month lows this week, funds tracked by the CFTC boosted bets on lower prices to the highest level in data beginning in 2006, however, they’re still bullish on a net basis, though by the smallest margin since November 2008.
Comex gold futures are moving in line with our expectations.
As mentioned in the previous update, below $1,625 prices could decline to $1,565-75 levels.
Immediate support is at $1,555-65 and failure to hold support here could further drag it done towards crucial support at $1,525-30 levels.
Resistance will now be seen in the $1,590-95 range from where prices declined sharply earlier in the week.
As the indicators hint at a possible pullback in the coming week, while $1,555 holds, a retracement to $1,590-95 or even higher to $1,625 levels look likely.
In the bigger and long-term picture prices are still in a broad consolidation after reaching all-time highs at $1,920. There is very good chance of prices testing $2,200-2,300 in 2013 while $1,520-25 remains undisturbed on the downside.
The wave counts are gradually hinting that a new impulse is in the offing.
A possible corrective wave “C” has possibly ended at $1,523.
As mentioned earlier update a corrective move in the form of wave A-B-C could have ended at $1,523.
A new impulse has begun with a potential to test $2,025-30 levels in the form of a fifth wave move.
A perfect confirmation of the same will be seen on a close above $1,785. However, a move below $1,690 has increased the possibility that the broad corrective consolidation in form of an “A-B-C-D-E” is in progress now.
RSI is in the oversold zone now indicating a possible rebound 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 supports and then pullback higher subsequently.
Supports are at $1,525 & $1,500 and resistances are at $1,595, $1,625 & $1,645.
(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.)