Comex gold ended sharply higher on Friday, after a weak US labor market report renewed fears about the health of the world's biggest economy and spurred safe-haven buying. US payrolls growth ground to a near halt in June, as employers hired the fewest workers in nine months, frustrating hopes that economic growth would pick up pace in the second half of the year.
Adding to the weak tenor of the report, the Department said the economy created 44,000 fewer jobs in April and May than previously thought. On Wednesday, the Fed Chairman, Mr Ben Bernanke, will testify before Congress in his semi-annual report. Investors will be listening carefully for any hints of further stimulus plans, though he is unlikely to reveal anything specific. Comex gold futures rose higher against our expectations. Rise above $1,510 and a close above $1,524 turned the picture neutral from bearish. It looks now like we are in a broad consolidation in the $1,465-1,565 range. The presently rally could find it difficult to cross $1,553-1,555 levels being a strong trend line resistance point. Prices could maintain this above-mentioned range for a while till it gets further clues on direction. A mild bullish bias has set in again. This will be confirmed once above $1,560. Such a rise could retest highs at $1,577 and eventually head towards $1,645 or even higher from there. Supports are at $1,535 followed by $1,524 now. Favoured view now expects supports to hold for a rise towards $1,555. Unexpected fall below $1,520 could dash our bullish hopes. The wave counts we have been tracking expecting a final fifth wave have been negated. The wave counts are hinting at a much bigger downside in the offing. Subsequent to the failed fifth wave, we could now be in the beginning of wave “A” possibly targeting $1,445 or even lower to $1,405. RSI is the neutral zone now indicating that it is neither overbought nor oversold.
The averages in MACD are below the zero line of the indicator, indicating the beginning of a bearish trend. Only a cross-over above the zero line in the indicator will now hint at revival of bullish trend. Therefore, look for gold futures to test the resistance levels and then correct lower again.
Supports are at $1,535, $1,510 and $1,475. Resistances are at $1,555, $1,567 and $1,578.
(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 email@example.com.)