Comex gold futures ended lower on Friday on profit-taking after an initial rally driven by growing confidence that Greece was edging closer toward winning a new rescue package waned. Profit-taking happened due to jitters ahead of a critical Monday meeting of euro zone finance ministers to finalize the Greek bailout deal. Bullion rose earlier in the session as buying sentiment gained a boost from news China's central bank might have used some of its massive foreign reserves to import gold late last year.
Central banks are also expanding their bullion reserves, adding 439.7 tons last year, the most in almost five decades the London-based World Gold Council said earlier.Record investment drove gold demand to 4,067.1 tons last year, the most since 1997,WGC estimated.
Comex gold futures are moving in a broad range waiting for direction. A broad consolidation in the $1710-45 range is underway. A possible break of the upside of this range should open the way for $1800 levels or even higher again. This is our favoured view. However, unexpected decline below $1705 could dash our bullish hopes. Big picture indicates that the recent low below $1525 as a possible intermediate bottom and the uptrend could resume higher. Strong support will be seen at $1680-85 levels also. Though the possibility of a corrective decline exists, we can expect prices to stabilise and move higher above $1800 subsequently. Only a fall below $1640 could force us to abandon 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 $1900 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 1535 and a wave “B” ended at $1804. A possible wave “C” has possibly ended at $1523.This view has regained momentum as prices went above $1710 on the upside.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 thebullish trend continues to be intact.
Therefore, look for gold futures to consolidate and then move higher.
Supports are at$1,710, $1685 and $1,660. Resistances are at$1,745, $1,775 and $1,800.
Gnanasekaar T.
(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 .)