Comex gold futures pulled back to close on Friday, helped by bargain-hunting after a sharp two-day plunge, but the market remains vulnerable to the downside ahead of the all-important Federal Reserve policy meeting next week.
Stronger-than-expected US retail sales numbers on Thursday, adding to last week's forecast-beating jobs report, strengthened speculation the Fed could start winding down its bond purchases at its Dec. 17-18 meeting.
Adding to the rosier economic picture was news that US lawmakers had struck a tentative budget deal that would avoid a government shutdown again in January.
Bullion has tumbled 27 per cent this year on speculation that the Fed will start scaling back its $85-billion in monthly bond buying, known as quantitative easing.
Comex gold futures are moving in line with our expectations. Favoured view expects that weekly resistance at $1,265-70 could cap the upside for a fall towards an important weekly support at $1,195.
Nearer resistance points are spread between $1,245 and $1,255 where downturns could occur. Unexpected crossover above $1,269 could turn the picture less bearish and might even turn it bullish to some extent.
If such a rise is seen during the week there would be a mild bullish potential for it to rise towards $1,295/1300 area.
As the weekly and daily trend is bearish there is a good chance for the price to break below this support and head towards next breakdown point at $1,175-85, opening the way for a projected objective at $1,135-45.
Such declines could be a potential long-term investment opportunity, considering the long-term trend which still looks healthy for gold.
The wave counts need to be reviewed once again. A failed fifth wave move at $1,800 resulted in a corrective decline to $1,181 in the form of wave “A”. A possible wave “B” is in progress with targets near $1,420 or even higher to $1,485. This means a wave “C” is expected to follow through which could target $1,150 or even lower.
Alternatively, from the peak of $1,920 a corrective decline in the form of “A-B-C” is already over at $1,181 and a new impulse has begun. Confirmation of such an impulse will be seen at $1,535. With the present move failing near $1,435-40, we will go with wave “B” ending at $1,433 and a possible Wave “C” underway with targets near $1,145-50 or even lower to $1,045.
RSI is in the neutral zone now indicating that it is neither oversold nor overbought. The averages in MACD are below the zero line of the indicator hinting at bearishness to be intact. Only a cross-over above the zero line could hint at bullishness again.
Therefore, look for gold futures to test the resistances initially and then decline again.
Supports are at $1,210, 1,185 and 1,145 and resistances are at $1,255, 1,275 and 1,300.
(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 firstname.lastname@example.org.)