Comex gold futures ended higher on Friday as a softer dollar offset fears of a tapering in stimulus measures next month. The US Federal Reserve has hinted that it will likely begin cutting back on its massive bond-buying program next month, as long as economic data continues to improve.

Gold prices have benefited from the stimulus measures, which have kept interest rates down and fanned worries about higher inflation.

Market participants worry that gold prices will decline as the accommodative policies are reined in. The dollar held near a seven-week low against a basket of currencies as risk sentiment picked up as investors abandoned the greenback after surprisingly strong trade figures from China.

Comex gold futures rose as expected. Prices were very volatile but managed to eventually edge higher. Failure to follow-through higher decisively is still a matter of worry. Technical picture is turning friendly with a potential in the coming week to break the key resistance at $1,335-40 level, opening the way for a test of next important resistance at 1,385-90 levels. Move above here could hint at further strength for $1,423-25 levels in the coming weeks. Only an unexpected decline below $1,265 could dent the bullish picture and such a fall could revive bearish momentum for a decline to recent lows or even lower. Favoured view expects prices to edge higher towards resistance mentioned above while $1,265 holds.

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” 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. There is a possibility that wave “C” has ended at the recent low at $1,180. Will wait for a confirmation before calling for a new impulse. RSI is in the neutral zone now indicating that it is neither oversold nor overbought. The averages in MACD have gone above the zero line of the indicator hinting at a possible bullish reversal.

Therefore, look for gold futures to consolidate and rise again. Supports are at $1,295, 1,265 and 1,250 and Resistances are at $1,335, 1,385 and 1,425.

(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.)

Related Topics