Gold to consolidate, rise

Comex gold futures ended higher on Friday after central banks across the world pledged to avert any market disruptions from weekend elections in Greece. The dollar fell against the euro, providing support to commodities priced in the greenback, as central banks in major economies stood ready to pump money into markets and prevent a credit squeeze should the election outcome rattle investor sentiment. Gold was also underpinned by hopes of further US monetary easing on signs that the American economy's recovery is on shaky ground. Friday's weak US manufacturing output and consumer sentiment data re-affirmed that. Gold's price volatility could rise, depending on the outcome of the Greek elections and any subsequent commitment by euro zone countries to deal with the region's economic crisis.

Comex gold futures are moving in line with expectations. As mentioned in the previous update, while the supports at $1,540 holds, a move to $1,645 could unfold and a close above here could open the upside again for $1,675 followed by $1,695-1,700 levels. Medium-term targets are in the $1,710 followed by $1,785-1,800 levels. Very strong support will be seen in the $1,575-1,585 range now followed by the $1,540-45 zone now. Only an unexpected fall below $1,545 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. A possible wave “C” has possibly ended at $1,523. With the current price move going to $1,627, feel a broad corrective rally is still underway. We will review the counts once we see an impulse move breaking the upside at $1,795. RSI is in the neutral zone indicating that it is neither overbought nor oversold. The averages in MACD are still below the zero line of the indicator hinting at bearishness to be intact. Only a cross-over above the zero line will hint a bullish reversal.

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

Resistances are at $1,645, $1,675 and $1,710 and Supports are at $1,615, $1,585 and $1,545.

(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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