Comex gold futures surged to a life-time high on Friday, on frenzied investment buying fuelled by the outlook for low US interest rates that has propelled bullion to its seventh consecutive weekly rise, its longest winning streak since 2007. Bullion jumped to new highs an ounce as US consumer spending rose for a ninth straight month in March with inflation at its highest in nearly a year. The greenback headed for the fifth consecutive monthly decline against a basket of six major currencies. The Fed signalled this week that borrowing costs will remain at a record low for an extended period. Assets in the SPDR Gold Trust, the biggest exchange-traded fund backed by gold, have expanded 1.5 per cent this month, heading for the biggest gain since August.

Comex gold futures moved higher much more than our expectations. As mentioned in the previous update, we anticipated the rally to continue higher $1,545-50 levels being a long-term trend line resistance point. The ease with which prices have broken this long-term trend line signifies the underlying momentum. It is difficult to identify any reversal points presently as it is in a new territory with the psychological $1,600, the only conceivable resistance in the near-term. However, a minor resistance comes in at $1,585-90. Supports are at $1,545-50 now. The indicators are extremely overbought hinting that a corrective decline could begin anytime soon. Fall below $1,525 could result in a gradual decline towards stronger support at $1,445 levels or even lower in the coming months. Only an unexpected fall below $1,445 could result in a further decline targeting $1,345.

Our wave counts are hinting at a final fifth wave move in progress. Our preference is now towards a beginning a fifth wave targeting $1,495 or even higher towards $1,525-30 rather than that of an irregular wave “B” as prices crossed $1,385.

We now see the recent high of $1,435 as the end of a third wave impulse only and a decline to $1,309 as an end of a minor corrective A-B-C decline. RSI is the extremely overbought zone now indicating that a downward correction looks likely.

The averages in MACD are still above the zero line of the indicator, indicating bullishness to be intact.

Therefore, look for gold futures to test the resistances and then fall lower subsequently.

Supports are at $1,545, $1,527 and $1,445. Resistances are at $1,585, $1,600 and $1,618.

(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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