Comex gold futures edged higher on Friday on the back of a weaker dollar and window dressing towards the quarter-end. Bullion garnered support as the dollar fell to one-month low against a basket of currencies, including the euro, after European finance ministers agreed to boost the Euro zone's debt crisis firewall to roughly €800 billion . Last year worries over the potential spread of the Euro zone debt crisis helped drive gold to record highs, but the metal has since re-established its usual inverse relationship with the dollar. In January, the Federal Reserve pledged to keep short-term interest rates close to zero through late 2014 and then last week Fed Chairman, Mr Ben Bernanke, said that additional accommodative policies might be needed to further improve the labour market boosting sentiment for gold.

Comex gold futures are consolidating in a very broad range building itself for the next move .As mentioned in the previous update, prices could move towards resistances at $1,675 followed by $1,695 levels. Daily close above $1,696 could open the way for $1,765 or even higher to $1,790-1,800 levels now. As mentioned earlier, we expected prices to consolidate in a broad range and then breakout higher again making new highs. We might have to drop this expectation on a decline below $1,640. Therefore, while $1,625-27 holds, we expect a gradual rise towards $1,720-25 initially followed by $1,765.

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, fell a broad corrective rally is still underway. We will review the counts once we see an impulse move either way. RSI is in the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD are below the zero line of the indicator hinting at bearishness to be intact.

Therefore, look for gold futures to test the resistance levels.

Resistances are at $1,695, $1,725 and $1,765 and Supports are at $1,645, $1,625 and $1,600.

(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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