Comex gold futures ended sharply higher on Friday to a five-month high, and looked set to resume its year-long rally after the Federal Reserve Chairman Ben Bernanke’s key speech raised hopes of a new round of monetary stimulus for the US economy.
Federal Reserve Chairman on Friday left the door wide open to a further easing of monetary policy, saying the stagnation in the US labor market was a “grave concern,” but he stopped short of providing a clear signal of imminent action.
He said the Fed had to weigh the costs as well as the benefits of more monetary stimulus, although he hinted that the costs were likely worthwhile.
The health of the job market throws an especially strong spotlight on a report due on September 7 on job growth in August. Hiring picked up in July but jobless rate moved up to 8.3 per cent.
Comex gold futures have moved perfectly in line with our expectations. As mentioned in the previous update, while the supports at $1,645 hold, we still hold on to our bullish view of a break above $1,645 opening the way up once again.
A gradual rise to $1,765-1,775 levels look likely in the coming months as hinted earlier. Initial resistance will be near $1,717-1,720 levels.
Subsequently, prices could aim for $1,795-1,800 levels being a critical medium-term resistance to cross. Due to overbought conditions, corrective declines could be seen in the coming week.
Immediate supports is at $1,672-1,675 levels now and while prices hold attempts to dip near this zone, the above mentioned upside targets can been tested in the coming sessions.
Only an unexpected daily close below $1,625 could cast doubts on our bullish view.
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.
A 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 above $1,627, we feel a possible new impulse to have begun.
A confirmation of the same has come now and we will detail our fresh counts in the next update.
The RSI is in the overbought zone now indicating a possible downside correction in the coming sessions.
The averages in MACD are above the zero line of the indicator hinting at a bullish reversal once again.
Therefore, look for gold futures to consolidate and rise.
Supports are at $1,675, $1,645 and $1,625 and Resistances are at $1,720, $1,755 and $1,795.
(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.)