Comex gold futures ended higher on Friday on course for its biggest weekly gain in almost two months, after the European Central Bank President, Mr Mario Draghi, signalled the bank would do whatever was necessary to hold the euro zone together.
Market participants will also keep an eye on Fed's policy meeting and the key non-farm payrolls data next week. Gold has been seesawing in a broad range, partly due to the Fed’s ambiguity on further easing.
Gold in the past few months has moved largely in tandem with the euro and riskier assets, with a relentless debt crisis in the euro zone chipping away at bullion’s safe-haven appeal and investors piling into assets perceived safer, such as the dollar and US Treasuries.
Comex gold futures rose higher as expected. As mentioned in the previous update, a sideways consolidation is under way with key supports in the $1,545-1,550 zone followed by critical support at $1,525. While these two supports hold, we still hold on to our bullish view of a break above $1,645 opening the way up once again.
Only a daily close above $1,645 has the potential to test the critical trend line resistance at $1,695-1,700 levels on the upside or even higher to $1,785-1,800 levels.
Immediate supports are at $1,610-1,612 followed by $1,595-1,598 now.
Only an unexpected daily close below $1,575 could lead to a decline towards $1,525 or even lower.
We still favour prices to break out higher while support levels hold.
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 $1,535 and a wave “B” ended at $1,804. A possible wave “C” has possibly ended at $1,523.
With the current price move going to $1,627, we feel a broad corrective rally is still under way.
We will review the counts once we see an impulse move breaking the upside at $1,795.
The RSI is in the neutral zone indicating that it is neither overbought nor oversold.
The averages in MACD have gone above the zero line of the indicator hinting at a bullish reversal once again.
Therefore, look for gold futures to consolidate and rise once again.
Resistances are at $1,645, $1,675 and $1,700 and supports are at $1,600, $1,575 and $1,525.
(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.)