Comex gold futures ended lower on Friday, as the dollar recovered against the major currencies after several top US Federal Reserve officials said the Fed is unlikely to extend its bond-buying stimulus program beyond a planned $600-billion. Gold was a major beneficiary since the Fed has kept short-term rates near zero since December 2008.
However, Portugal's credit downgrade and escalating political unrest in the Arab world underpinned safe-haven demand.
The metal gained 0.7 per cent this week after turmoil in Libya radiation leaks from a damaged nuclear reactor in Japan and Europe's lingering debt crisis spurred demand for an investment haven.
Gold investors now look forward to next week's heavyweight economic indicators, including Friday's non-farm payrolls report.
Comex gold futures are still struggling to follow-through higher above recent highs. As mentioned in the previous update, we saw a push higher above $1,440 after a consolidation between $1,400-1,435 levels.
We can now expect a decline towards $1,415-20 levels and then rally to continue higher towards $1,465-75 levels again.
Only an unexpected fall below $1,405 could result in a corrective decline targeting $1,365 levels initially.
Resistance is now seen at $1,435 followed by $1,445 levels now.
Only an unexpected decline below $1,354 could revive bearish hopes again for $1,300 or even lower to $1,250.
We have to revisit the counts once again. This typically happens when markets are either nearing a peak or in a messy correction.
As mentioned earlier, a daily close above $1,395, will hint that a new impulse or an irregular wave “B” could be in the making.
Our preference is now towards a beginning a fifth wave targeting $1,495 rather than that of an irregular wave “B” as prices crossed $1,385.
We now see the recent high of $1,435 as the end of a third wave impulse only and a decline to $1,309 as an end of a minor corrective A-B-C decline.
RSI is still in the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD have crossed above the zero line of the indicator signalling a bullish reversal.
Therefore, look for gold futures to test the supports and then rise higher subsequently.
Supports are at $1,415, $1,405 and $1,365.
Resistances are at $1,435, $1,455 and $1,475.
(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_thiagarajan@yahoo.com .)