Comex gold ended higher on Friday, as an upbeat US payrolls report and glimmers of hope for an end to the euro zone debt crisis failed to move investors back toward riskier assets. Gold was hit by a bout of liquidation by market participants scrambling to raise cash to meet margin calls in battered stock markets. The employment data eased pressure on the U.S. Federal Reserve to take new action to boost growth after a string of lacklustre economic data this week. However, subsequently, S&P cut the top-tier AAA credit rating on concerns about the government's budget deficit and rising debt burden attracting safe-haven buying in gold again.
Comex gold futures are moving higher in line with our expectations. As mentioned in the previous update, we expected the $1,645-75 being a top range from where a reversal can be expected. Support at $1,635-40 could be holding dips in the near-term for a push higher towards $1,675-80 levels or even higher towards the psychological $1,700 mark. Only an unexpected fall below $1,630will confirm that the up move could have ended and corrective decline has begun. Such a fall could bring it down initially towards $1,555-58 being a strong near-term support point. After that there are several supports on the way till $1,485.
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 $1,675-1,700 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. RSI is the overbought zone now indicating a possible downside correction in the offing. The averages in MACD are still above the zero line of the indicator hinting at bullishness to be intact. 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 $1,635, $1,610 and $1,558. Resistances are at $1,1655, $1,675 and $1,700.
(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.)