Comex gold futures ended higher on Friday erasing some of this week’s losses as a better-than-expected reading on the US labour market dented the dollar and drew investors to risky assets such as commodities.
The euro fell to a one-week low and dragged gold prices lower after the European Central Bank (ECB) disappointment, especially as hopes for bold actions were raised by ECB chief Mario Draghi’s vow last week to do everything possible to preserve the single currency.
But gold later rebounded, extending gains through New York trading as the US dollar retreated on an increased investor appetite for risk after the jobs report and a similarly upbeat reading on the service sector.
Since, gold has been moving in line with risky assets, prices rose despite the economic data dashing any hopes of a stimulus.
Comex gold futures rose higher as expected with some volatility.
As mentioned in the previous update, a sideways consolidation is under way with key supports in the $1,545-1,550 zone followed by critical support at $1,525.
While these two supports hold, we still hold on to our bullish view of a break above $1,645 opening the way up once again.
We still favour an upside breakout while prices stay above support levels.
Only a daily close above $1,645 has the potential to test the critical trend-line resistance at $1,695-1,700 levels on the upside or even higher to $1,785-1,800 levels.
Immediate supports are at $1,575-1,585 levels followed by $1,595-1,598 now.
Only an unexpected daily close below $1,560 could lead to a decline towards $1,525 or even lower.
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.
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 to $1,627, a broad corrective rally is still under way. We will review the counts once we see an impulse move breaking the upside at $1,795.
The Relative Strength Index is in the neutral zone indicating that it is neither overbought nor oversold. The averages in moving average convergence divergence have gone above the zero line of the indicator hinting at a bullish reversal once again.
Therefore, look for gold futures to consolidate and rise once again.
Resistances are at $1,625, $1,645 and $1,700 and Supports are at $1,585, $1,560 and $1,525.
(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.)