Gold futures may consolidate, rise higher

Comex gold futures ended higher on Friday its biggest one-day rise in more than three years, as a surprisingly weak US payrolls report added to fears about a global economic slowdown and fuelled talk of further US monetary easing.

The US non-farm payrolls grew by just 69,000 last month, falling well below forecasts of 1,51,000.

The unemployment rate rose 0.1 percentage points to 8.2 per cent, while the March figures were revised downward.

The Fed has previously indicated that additional policy action would only become necessary if the economy worsened, and if inflation seemed likely to remain below its mandate-consistent rate of 2 per cent over the medium-term

. Any positive news flows from the Euro zone could further bolster sentiment and take prices sharply higher again.

Comex gold futures moved perfectly in line with our expectations.

Support

As mentioned in the previous update, prices have been finding support near $1,525-1,535 levels and high volumes have further increased hopes of a strong revival up ahead for gold futures. Since the supports did not give away a test of resistances at $1,615 was expected.

Gold futures could gradually head towards resistances at $1,675-1,680 levels in the coming weeks.

Medium-term targets are in the $1,710 level followed by $1,785-1,800 levels. Very strong support will be seen in the $1,595-1,600 range now followed by the $1,580-1,585 zone. 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, we feel a broad corrective rally is still under way.

We will review the counts once we see an impulse move breaking the upside at $1,795. The 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 higher once again.

Resistances are at $1,655, $1,675 and $1,710 and Supports are at $1,600, $1,580 and $1,570.

(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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