Agri Business

Gold may test resistance levels, fall

Updated on: Feb 06, 2011
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Comex gold futures ended lower on Friday as the dollar rose and safe-haven buying ebbed after an apparently unfounded television report sparked intense speculation that Egypt's President, Mr Hosni Mubarak, could be stepping down soon, which would end unrest.

The dollar gained against the euro after a the Labor Department report showed the US jobless rate in January unexpectedly fell to 9 per cent, the lowest in 21 months. Earlier, gold reached a two-week high of $1,361 an ounce as the mounting conflict in West Asia boosted demand for a haven. US gold futures' specs net longs or bullish position decreased 6 per cent in the week up to February 1, US CFTC's latest trade data showed.

Comex gold futures moved perfectly in line with our expectations. As mentioned in the previous update, daily close above $1,345 could now aim for the next resistance in the $1,355 or even higher towards $1,365-1,375 levels.

We still expect prices to decline below $1,300. The bearish picture for gold futures still looks intact and the move to $1,360 levels was a pullback only in the overall bearish trend. Only an unexpected rise above $1,393 would cause doubts on our bearish view. Such a rise could aim for $1,474-1,485 levels. For the coming sessions, we expect prices to decline while $1,375 caps upside attempts.

We will once again revisit the wave counts, as the markets witnessed lot of volatility. We see the recent high of $1,435 as the end of the fifth wave impulse only and now a new corrective wave “A-B-C” in the making. We believe wave “A” has possibly ended at $1,307. A corrective pullback in the form of a wave “B” is in the making. Only a daily close above $1,395, will hint that a new impulse or an irregular wave “B” could be in the making.

The RSI is still in the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD are still below the zero line of the indicator signalling bearishness to be intact.

Therefore, look for gold futures to test the resistance levels and then fall lower subsequently.

Supports are at $1,335, $1,321 and $1,300. Resistances are at $1,355, $1,364 and $1,378.

(The author is the Director of Commtrendz Research and also in the advisory panel of the 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_thiagarajan@yahoo.com .)

Published on February 06, 2011

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