Comex gold futures ended lower on Friday on the back of dollar strengthening as uncertainty over negotiations for a bailout package for Greece prompted investors to sell the metal. European finance ministers held back the €130 billion rescue, asking Greek policy makers to pass the latest austerity package into law. Gold's losses were limited as liquidity improved a day after the biggest operator of US futures exchanges, CME Group, lowered trading margins for a range of commodities contracts including gold, silver and platinum. Risk aversion drove down equity markets and industrial commodities such as crude oil and copper, as investors favoured safe-haven US Treasuries, sending the dollar higher against the major currencies.
Comex gold futures are moving perfectly in line with our expectations. As mentioned in the previous update, a corrective decline to $1,660-1,670 looks likely being a trend line support point and a fibonnaci retracement point. Though prices went above $ 1,749 as cautioned earlier, there was no follow-through which resulted in a break below important support at $ 1,725 opening the way for our preferred targets near $ 1,655-1,670. However, the big picture indicates that the recent low below $ 1,525 as a possible intermediate bottom and the uptrend could resume higher. Strong support will be seen at $ 1,680-1,685 levels also. Though the possibility of a corrective decline exists, we can expect prices to stabilise and move higher above 41,800 subsequently. Only a fall below $ 1,640 could dampen our big picture bullish view.
The wave counts have to be revisited again as a possible fifth has ended. Potential targets for the fifth wave have already been met. Prices have gone above $1,900 as an extension of the fifth wave. Fall below $1,600 confirmed that a corrective “A-B-C” has started. It is possible that Wave “A” ended at 1,535 and a wave “B” ended at $ 1,804. A possible wave “C” has possibly ended at $1,523. This view has regained momentum as prices went above $1,710 on the upside. The RSI is in the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD are above the zero line of the indicator hinting that the bullish trend continues to be intact.
Therefore, look for gold futures to test the supports and then rise higher again.
Supports are at $1,710, $ 1,685 and $1,660. Resistances are at $1,745, $1,775 and $1,800.
(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_thiagarajan@yahoo.com .)