Comex gold ended higher on Friday as reservations over a bailout plan for Greece and concerns about
a lack of agreement on the US debt ceiling spurred safe-haven buying again. Investors focused on how the second debt rescue package for Greece and steps to stop the European debt crisis from spreading would be implemented.
Adding to the uncertainty and to investor interest in less-risky assets was a bomb attack and shooting in Norway that killed at least 17 people. Gold continues to find safe-haven buying given the debt concerns on both sides of the Atlantic. The dollar and the euro remain vulnerable to further debasement and depreciation. Comex gold futures are moving higher in line with our expectations.
As mentioned in the previous update, favoured view expected supports to hold for a rise towards $1,617-1,620 initially being a trend line resistance as seen in the chart above. As expected we saw a rise above $1,577 and eventually could head towards $1,625-1,630 or even higher to $1,645. Supports are at $1,577 followed by $1,560 now.
Only an unexpected fall below $1,541 could dash our bullish hopes and hint at a turnaround and a much needed corrective decline. The wave counts have to be revisited again as a possible fifth could be in the making again. Potential targets for the fifth wave are at $1,620 followed by $1,675 now.
The corrective down move from $1,577 towards $1,478 seems to be a complex corrective pattern. Subsequently, the fifth wave is in progress now. The RSI is the overbought zone now indicating a possible downside correction in the offing. A negative divergence is also in the making, where prices are making a new high, while it is not confirmed in the indicators.
The averages in MACD are above the zero line of the indicator hinting at a bullish trend. Only a cross-over below the zero line in the indicator again will signal the resumption of bearish trend. Therefore, look for gold futures to test the resistance levels and then correct lower again. Supports are at $1,585, $1,576 and $1,540. Resistances are at $1,1605, $1,620 and $1,645.
(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.)