Comex gold futures ended higher on Friday as weakness in US equities, strong fund buying and Asian physical demand lifted bullion to its fourth consecutive weekly gain.
However, an improving US economy could eventually lead to a rising interest-rate environment which could pressure gold.
In China, physical gold premiums on the Shanghai Gold Exchange rose on Friday. Buying by China, the world's biggest gold consumer, has been robust in recent weeks ahead of the Lunar New Year on January 31.
For gold, much depends on whether this is just a beginning of the year portfolio shuffle on the back of rebalancing commodity indices or investors growing more bullish on gold's prospects.
Comex gold futures moved in line with our expectations.
As mentioned in the previous update, short-term picture suggest further gains towards $1265-1,270 levels with a possibility even to extend towards $1,285 levels.
Strong resistance is expected at $1265-1,270 in the coming week, being a falling trendline resistance point.
Resistance at $1,265-1,267 is seen capping corrective upticks in the coming sessions to keep alive the chances for next decline towards $1,200-1,210.
Supports at $1240-1,245 could hold for the time being to enable such recoveries.
Only a fall below $1,235 could weaken the picture again. Such a fall could bring back the $1,180 levels in focus.
We also believe such declines could be a potential beginning for a long-term investment opportunity, considering the long-term trend which still looks healthy for gold. A daily close above $1,310 could signal a premature end to this downtrend. The wave counts need to be reviewed once again. A failed fifth wave move at $1,800 resulted in a corrective decline to $1,181 in the form of wave “A”.
A possible wave “B” is in progress with targets near $1,420 or even higher to $1,485. This means a wave “C” is expected to follow through which could target $1,150 or even lower.
Alternatively, from the peak of $1,920 a corrective decline in the form of “A-B-C” is already over at $1,181 and a new impulse has begun.
Confirmation of such an impulse will be seen at $1,535.
With the present move failing near $1,435-40, we will go with wave "B" ending at $1,433 and a possible, wave "C" underway with targets near $1,125-1,245 or even lower to $1,045. RSI is in the neutral zone now indicating that it is neither oversold nor overbought.
The averages in MACD are below the zero line of the indicator hinting at bearishness being intact.
Only a cross-over above the zero line could hint at bullishness again. Therefore, look for gold futures to test the resistance levels.
Supports are at $1245, $1210 and $ 1170. Resistances are at $1265, $1,275 and $1295.
(The author is the Director of Commtrendz Research and also in the advisory panel of Commodity exchanges and corporate houses. The views expressed in this column are his own. This analysis is based on the historical price movements and there is risk of loss in trading. He can be reached at >gnanasekar.t@gmail.com. )