Gold futures may decline

Comex gold futures fell lower on Friday, after a surprisingly strong US labour-market reading re-ignited fears that the Federal Reserve would soon curtail bond purchases. Employers in the US added 204,000 workers last month, the Labour Department said, following a revised 163,000 gain in September that was larger than initially estimated. US gross domestic product grew at a 2.8 per cent annual rate in the third quarter, the quickest pace in a year, after expanding 2.5 per cent in the second quarter. Better-than-expected gross domestic product and payroll growth do, typically, indicate economic strength. Tapering would involve increasing interest rates. Traditionally, rising interest rates leads investors to pull out of gold in search of better yield. This, naturally, sends gold prices lower.

Comex gold futures moved lower against our expectations. As mentioned in the previous update, a fall below $1,315 is hinting that it might not rise as expected but could drift towards $1,300 or even lower. As anticipated in the previous update, price could stay below $1,335/40 and decline towards $1,275/80. Prices fell exactly as per expectations. Also, in the bigger picture, while below $1,375 it could remain bearish for a decline towards $1,250 or $1,180. Immediate support is at $1,240-45. Below $1,240, prices could further decline towards $1,175-80 levels in the coming weeks. Only an unexpected crossover above $1,340 could lead it to next resistance at $1,375.

The wave counts need to be reviewed once again. A failed fifth wave move at $1,800 resulted in a corrective decline to $1181 in the form of wave “A”. A possible wave “B” is in progress with targets near $1,420 or even higher to $1485. This means a wave “C” is expected to follow through which could target $1,150 or even lower. Alternatively, from the peak of $1,920 a corrective decline in the form of “A-B-C” is already over at $1,181 and a new impulse has begun. Confirmation of such an impulse will be seen at $1,535. With the present move failing near $1,435-40, we will go with wave “B” ending at $1,433 and a possible Wave “C” underway with targets near $1,145-50 or even lower to $1,100. RSI is in the neutral zone now indicating that it is neither oversold nor overbought. The averages in MACD have gone below the zero line of the indicator hinting at bearishness to be intact. Only a cross-over above the zero line could hint at bullishness again.

Therefore, look for gold futures to decline in the coming sessions.

Supports are at $1,275, 1,245 and 1,185 and Resistances are at $1,305, 1,335 and 1,365.

(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 gnanasekar.t@gmail.com.)

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