Comex gold ended lower on Friday, falling further from the previous session's record highs, as a rise in appetite for riskier assets prompted profit-taking. A jump in US retail sales helped temper concern that the recovery is faltering, eroding demand for the metal as a haven. Also, CME raised margins on gold contracts by 22 per cent as of the close of business yesterday. The rebound in stock markets since Wednesday's slide has diverted money from gold into riskier assets once again.
Dwindling supply of scrap gold could further underpin gold's long-term bull-run. Surge in gold prices has failed to lure investors globally into selling their old jewellery as during the 2008 financial crisis. Though a technical correction could drag prices lower, safe-haven buying could return if the crisis in Euro zone worsens.
Comex gold futures moved higher in line with our expectations. As mentioned in the previous update, we expected dips to be held in the in the near-term for a push higher towards $1,700 mark. It moved further higher towards $1,817 levels.
A corrective dip to $1,677-78 looks likely being an important support in the near-term. Break of this level could open the way for further corrective dip towards $1,575 levels. Resistances are in the $1,765-85 zone. Unexpected rise above $1,820 could however, result in the rally to prolong higher further towards $1,895-1,900 levels.
We also expect another scenario where dips to $1,695-1700 holds in the coming sessions, and then a subsequent rally towards $1,865-75 is possible.
The wave counts have to be revisited again as a possible fifth could be in the making again. Potential targets for the fifth wave have already been met. Chances exist for one last move towards $1,885-1,900 as an extension of the fifth wave. 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 still in 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 support levels and then rise higher again.
Supports are at $1,723, $1,678 and $1,575. Resistances are at $1,765, $1,798 and $1,820.
(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.)