Gold may consolidate, rise higher again

Gnanasekaar T. | Updated on December 04, 2011 Published on December 04, 2011

Comex gold futures ended higher on Friday as it posted its largest weekly gain in over a month. A strengthening labour market supported worries over inflation. Also helping investor sentiment was data that showed the US unemployment rate fell to a 2-1/2 year low of 8.6 per cent in November as companies stepped up hiring, further evidence the US economic recovery was gaining momentum.

Further supporting the sentiment in gold, South Korea's central bank bought 15 tonnes of gold in November, following purchases of 25 tonnes in June and July, as central banks around the world, especially in emerging economies, have aggressively bought bullion over the past few months.

Comex gold futures moved as per expectations. As mentioned in the previous update, rise above $1,715 could take prices higher towards $1,745 levels. A possible bullish turnaround could be in place as prices have gone above near-term important resistances and indicators support a push higher once again.

The big picture could turn bullish again and the overall weakness is seen abating. Supports are at $1,735 followed by $1,722 in the near-term. Another round of consolidation in the $1,710-1,765 zone could be seen before we see a move higher into the $1,800 levels again. Unexpected dip below $1,705 could dash our bullish hopes.

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. Fall below $1,675 could hint at a beginning of the wave “C” targeting $1,400 levels. Unexpected rise above $1,810 could force us to review our wave counts.

The RSI is still in the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD have gone below the zero line of the indicator hinting at a bearish reversal.

Only, a cross-over above the zero line again could hint at resumption in bullish trend.

Therefore, look for gold futures to consolidate and rise higher again.

Supports are at $1,735, $1722 and $1,705. Resistances are at $1,765, $1,795 and $1,810.

(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

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Published on December 04, 2011
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