Comex gold futures ended marginally higher on Friday, boosted by prospects of future interest cuts by the European Central Bank, and a pick-up in risk sentiment on the back of upbeat monthly US employment data. The US economy added 146,000 jobs in November, beating market expectations. The unemployment rate fell two-tenths of a percentage point to 7.7 per cent, the lowest level since December 2008. The fear that QE3 could end was the main factor behind gold's dip right after these numbers were released, but sentiment change as the euro bounced higher again. However, fund managers during the week ended Tuesday slashed their net bet on higher prices by the largest margin since early March. Also, India's central bank will soon release a report making recommendations on how to reduce demand for gold imports, which would help improve the country's trade balance.
Comex gold futures are lower against our expectations. As mentioned in the previous update, structures are turning weak and bearishness gaining momentum again. A daily close below $1,700 warns of a decline to $1,675 followed by $1,625 levels. While resistance in the $1,725-30 range caps upside attempts, a decline to the above mentioned levels look likely in the coming sessions. Only a close above $1,745 could hint at resumption in up trend. Once this resistance is cleared, then only prices could aim for the important psychological resistance at $1,795-1,800 levels. While there is short-term weakness, big picture structures remains strong and the uptrend remains intact.
The wave counts are gradually hinting that a new impulse is in the offing. A possible corrective wave “C” has possibly ended at $1,523. As mentioned earlier update a corrective move in the form of wave A-B-C could have ended at $1,523. A new impulse has begun with a potential to test $2,025-30 levels in the form of a fifth wave move. A perfect confirmation of the same will be seen on a close above $1,785. However, move below $1,690 could hint that the broad corrective consolidation in form of an “A-B-C-D-E” is in progress. RSI is in the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD have gone the zero line of the indicator hinting at a bullish reversal. Therefore, look for gold futures to test the support levels. Supports are at $1,685, $1,670 and $1,627 and Resistances are at $1,730, $1,745 and $1,765.
(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 .)