Comex gold futures ended lower on Friday on profit-taking as sharp gains from earlier in the week based on economic optimism and a Greek bailout deal prompted investors to take profits.
Bullion posted its largest weekly rise in four weeks, as expectations for further easing by China and a near-zero interest-rate outlook for the next several years boosted the metal's inflation-hedge appeal. News that Europe sealed a rescue package for Greece to avert an imminent chaotic default lifted gold along with the euro and other riskier assets.
Gold holdings in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, increased 1.81 tonnes to 1,284.61 tonnes as of Feb. 24 indicating that investment demand which was missing for a while has once again returned.
Comex gold futures moved higher as per expectations. As mentioned in the previous update break above consolidation in the $1,710-45 range opened the way for $1,800 levels or even higher again. Strong resistance will be seen in the $1,800-05 levels on the upside.
We believe there could be another round of consolidation in the $1,800 levels before prices ultimately break above the all-time highs at $1,923. Any dips to $1,745-50 could hold any dips now. This also happens to be a rising trend line support point as seen in the chart.
As we have been maintaining big picture indicates that the recent low below $1,525 as a possible intermediate bottom and the uptrend could resume higher. Only a fall below $1,705 could postpone the bullishness temporarily.
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 1535 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 and a new impulse is underway. 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 consolidate and then move higher.
Supports are at $1,765, $1,745 and $1,710. Resistances are at $1,1795, $1,805 and $1,840.
(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.)