Comex gold futures endedlowerFridayon an indecisive note with euro-zone anxiety continuing to cast a wide shadow over the markets. In the US, the recovery is gaining steam as evidenced by Friday's Labor Department report that the country gained 200,000 jobs in December, exceeding market expectations. Global tensions between Iran and the west is attracting safe-haven buying of gold. The U.S. and its allies are tightening restrictions on Iran accusing it of a covert plan to build nuclear weapons, a charge Iran’s government denies. About one in six barrels of oil traded worldwide flows through the Strait of Hormuz between Iran and Oman as per the U.S department of energy.
CHART
Comex gold futures are moving in line with our expectations. As mentioned earlier, we can expect a pullback towards $1600-25 levels in the coming sessions and then the decline to continue lower again. Declines to $1585-90 could hold supports in the coming sessions. Failure to hold support here could take prices lower to $1525 again. However, a rise above $1645 could drive prices higher again towards trend line resistance at $1700-05 levels. Chance of a rise towards $1700 looks likely while supports at $1585-90 holds in the coming week. Only a move above $1718 could revive bullish hopes again.
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. Fall below $1675 could hint at a beginning of the wave “C” targeting $1400 levels.Only an unexpected rise above $1810 could force us to review our wave counts.RSI is still in the neutral zone now indicating that it is neither overbought nor oversold.The averages in MACD have gone below the zero line of the indicatorhinting at a bearish reversal.Only, a cross-over above the zero line again could hint at resumption in bullish trend.
Therefore, look for gold futures to test the resistances and then decline lower again.
Supports are at$1,585, $1535 and $1,450. Resistances are at$1,645, $1,685 and $1,705.
(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.)