Comex gold futures ended lower on Friday, as soaring oil prices fuelled by widening clashes in Libya prompted investors to pile into safe havens. US crude prices jumped to their highest levels since September 2008 as Libyan security forces cracked down on protesters in Tripoli and clashed with rebels near the major oil terminals.

The positive correlation between gold and oil has been strong of late. While silver surged 3 per cent to 31-year highs, the gold-silver ratio, which shows how many ounces of silver it takes to buy one ounce of gold, fell to a 13-year low, the weakest since 1998.

Gold held gains even as data showed US employers hired workers at the fastest pace in nine months in February and the jobless rate slipped to a nearly two-year low of 8.9 per cent, showing the economy was positively recovering.

Comex gold futures are moving in line with our expectations. As mentioned in the previous update, once near-term resistance at $1425-35 is taken out, we can expect prices to inch higher towards $1455 or even higher to $1495.

However, a minor consolidation is seen now between $1410-1435 levels before a break higher which could target $1455 levels. Only an unexpected fall below $1390 could result in a corrective decline targeting $1365 levels initially. However, indicators confirm a bullish reversal trend in gold and a possibility of making new highs now. Supports are now seen at $1410 followed by $1390 levels. Only an unexpected decline below $1354 could revive bearish hopes again.

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 $1495 rather than that of an irregular wave “B” as prices crossed $1385. We now see the recent high of $1435 as the end of a third wave impulse only and a decline to $1309 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 resistances and then fall lower subsequently.

Supports are at $1,410, $1,395 and $1,365. Resistances are at $1,435, $1,455 and $1,495.

(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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