Gold may test supports, rise higher

Comex gold futures ended higher on Friday in over a month, after encouraging US payrolls data dented hopes of any additional stimulus from the Federal Reserve, which had been priced into bullion's recent rally.

US non-farm payrolls jumped 243,000, the Labor Department said, as factory jobs grew by the most in a year.

The unemployment rate fell to 8.3 per cent - the lowest since February 2009.

The Fed said last week it would likely keep rates low until at least late 2014 and it was ready to offer the economy additional stimulus.

Better jobs data suggest that a QE3 might not be needed, but still gold could be underpinned by low interest rates.

Comex gold futures are moving perfectly in line with our expectations.

As mentioned in the previous update, prices could rise higher towards $1,760 on the upside.

A corrective decline to $1,660-1,670 looks likely being a trend line support point and a Fibonacci retracement point.

As mentioned earlier, the big picture indicates that the recent low below $1,525 as a possible intermediate bottom and the uptrend could resume higher.

Presently, it needs to rise past $1,749 to erase the temporary bearishness.

Else it is more likely to stay below $1,742/1,745 and fall towards $1,708 or even lower to $1,670 levels.

Strong support will be seen at $1,680-1,685 levels also.

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.

RSI

This view has regained momentum as prices went above $1,710 on the upside. The RSI is in the neutral zone now indicating that it is neither overbought nor oversold.

The averages in MACD are above the zero line of the indicator hinting that the bullish trend continues to be intact.

Therefore, look for gold futures to test supports and then rise higher again.

Supports are at $1,725, $1,685 and $1,660. Resistances are at $1,745, $1,775 and $1,800.

(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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