Gold futures may test support levels, rise higher

Comex gold futures ended marginally higher on Friday as market participants remained on the sidelines ahead of a key US option expiration and a Federal Reserve policy meeting next week.

The metal inched down despite usually bullish factors including a weaker dollar, an oil rally and gains in US equities.

Gold is struggling for direction as buyers await the outcome of the International Monetary Fund and World Bank meetings this weekend, at which plans to tackle the euro zone debt crisis will be discussed, and the Federal Reserve's meeting on US monetary policy next week.

Euro advanced as a report showed German business confidence unexpectedly increased for a sixth month in April.

The coming week's FOMC statements would be key for gold prices for direction going forward.

Comex gold futures are still consolidating in a very broad range waiting for direction.

Prices pulled back higher but failed to sustain. As mentioned in the previous update, chances exist for a decline below psychological support at $1,600. It could even accelerate further towards $1,555-1,560 levels too in the coming sessions.

So far, prices have held well in the $1,625-1,635 zone well.

While this support holds, chances exist for a push above $1,675-1,685 levels in the coming sessions.

Break above $1,655 could be the first sign of such a move to happen. Important resistance is in the $1,680-1,685 zone presently.

Only a direct rise above $1,685 could hint a possible early recovery towards $1,700 levels or even higher. Our favoured view still expects resistances to cap upside attempts for a decline again below $1,600 levels.

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, a broad corrective rally is still under way.

We will review the counts once we see an impulse move either way.

The 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 support levels and then rise higher subsequently.

Resistances are at $1,655, $1,685 and $1,710 and Supports are at $1,635, $1,620 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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