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Comex gold futures ended sharply lower on Friday, after the payroll data showed a huge improvement denting sentiment for gold as a safe-haven. The dollar was poised to rise for a second day against a basket of currencies, putting pressure on commodities priced in the greenback as they become more expensive for buyers.
Gold prices had rallied to record levels on the Federal Reserve's past stimulus efforts, and had advanced close to $1,800 after the announcement of the open-ended bond-purchasing program, known as QE3. At the time, investors flocked to gold to protect their wealth against the threat of higher inflation down the road. But Friday's data swung the pendulum of market sentiment to a more hawkish outlook on the Fed. Comex gold futures are lower in line with our expectations. As mentioned in the previous update, a fall to $1,670-75 levels looks likely while resistance at $1,735-45 cap. We now immediately expect a decline lower to supports near $1,670-75. Presently, prices are poised to drop further to $1,645 or even lower to $1,630 levels being short-term support levels. Once below this level, chances are bright for a decline back towards $1,525 levels where prices could find strong buying interest once again. In the coming session, while resistances in the $1,695-1,700 range caps upside attempts, a decline to $1,645 or even lower looks likely. Our bearish view could get dented on a close above $1,726. The wave counts have to be revisited again as a possible fifth has ended. Potential targets for the fifth wave have already been met. The averages in MACD have gone below the zero line of the indicator hinting at a bearish reversal. Therefore, look for gold futures to fall lower. Supports are at $1,670, $1,645 & $1,605 and Resistances are at $1,695, $1,725 & $1,765.
( 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 .)
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