Comex gold futures ended lower on Friday, as the dollar surged against the euro and weekend profit-taking was seen.
Earlier in the session, gold rose after data showed gasoline and food prices hoisted U.S. inflation to a 2-1/2 year high in April, but there was little sign of a broader pick-up in consumer prices that would trouble the Federal Reserve.
Gold was also pressured as the dollar scaled six-week peaks against the euro as concerns about the global economy spurred a return to the greenback's safety. Gold dropped 5.2 per cent from its all-time high as commodities including copper and oil slipped on speculation of slowing economic growth as governments raise interest rates to contain inflation.
Comex gold futures are moving in line with our expectations.
As mentioned in the previous update, we could either see a consolidation now or any rallies being met with good resistance in the $1,515-20 range for a decline again. Failure to sustain and close above $1,500 could pressure gold prices lower in the coming sessions.
Prices are expected to head towards $1,445, which happens to be a confluence point, meaning several techniques pointing towards that as a critical support level.
Another important long-term trend line support comes in at $1,405 as seen in the chart. Only an unexpected fall below $1,445 could result in a further decline to $1,405 or even lower to $1,345. Direct rise above $1,527 could however hint at bullishness again.
Our wave counts are hinting at a final fifth wave possibly getting over at $1,577. Our preference is now towards a wave “A” in progress. Subsequently, a pullback in the form of wave “B” and then an even sharper decline lower in the form of wave “C” can be seen now.
There is a possibility of the fifth wave to continue rising higher above $1,577 towards $1,600 levels. This will be confirmed on a daily close above $1,525.
RSI is the neutral zone now indicating that it is neither overbought nor oversold.
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 support levels.
Supports are at $1,478, $1,445 and $1,405.
Resistances are at $1,510, $1,527 and $1,538.
(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 >firstname.lastname@example.org. )
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