Comex gold futures ended lower on Friday, on profit-taking ahead of the weekend after the metal has posted steady gains on physical buying following a drastic price slump on April 15. Gold futures showed a muted reaction to data showing US gross domestic product fell short of economists' expectations. Data showed US GDP growth of only 2.5 per cent on an annualised basis in the first quarter, below market expectations. Demand for physical coins and bars continued to prop up gold futures Friday, though at a slower pace than earlier in the week as the market's rebound from two-year lows. SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell 0.25 per cent to 1,090.27 tonnes on Thursday. The current holdings are at their multi-year lows indicating waning investment demand interest and loss of confidence.
Comex gold futures retraced higher as expected. As mentioned in the previous update, a recovery to either to $1,475 or even higher to $1,517-20 looks likely in the coming sessions. There are various supports now which could hold for a push higher to $1,525-45 levels. Initial support will be at $1,425 followed by $1,405 and stronger support is at $1,385-87. Below $1,385 the decline could gather momentum and go on to test the long term targets in the $1,275-1300 zone. As illustrated earlier, several indicators suggest gold is already in the final stages of a bear market. A 38.2 per cent pullback from its 2011 peak at $1,923 would be close to $1,280-85. And a 50 per cent retracement of a rally that began in 2008 would be close to $1,300-02.
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 $1,300.
RSI is in the still in the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD are still below the zero line of the indicator hinting at bearishness to be intact.
Therefore, look for gold futures to test the support levels and move higher subsequently.
Supports are at $1,425, 1,395 and 1,300 and Resistances are at $1,495, 1,525 and 1,545.
(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 .)