Comex gold futures ended lower on Friday but were headed for its biggest weekly rise in more than a month, following a decision by the European Central Bank to keep rates unchanged despite signs of stabilisation in the battered economy.
Buying of physical gold from China continued to underpin market sentiment, as purchases have picked up before the Lunar New Year, when sales of jewellery, bars and coins increase.
Also, Indian imports picked up this week as buyers anticipated a potential gold-import tax increase.
The magnitude of rise in the Euro did not evoke such a positive response in the precious metals complex suggesting that market participants could have moved out money from the yellow metal into cash or other assets.
Comex gold futures are stuck in a narrow range. As mentioned in the earlier week, we expected prices to bounce back higher towards $1,675-85 levels initially while $1,625 holds.
Crucial support is still at $1,625 and failure to hold support here could further take it lower towards $1,565-75 levels.
Our favoured view expects prices to find a possible intermediate bottom near $1,550-65 range in the coming months. In the bigger picture prices are still in a broad consolidation after reaching all-time highs at $1,920. There is very good chance of prices testing $2,200-2,300 in 2013 while $1,520-25 remains undisturbed on the downside. Prices could now initially find support in the $1,645-50 range and then pullback higher towards $1,690-95 levels. But subsequently, the momentum could fizzle out and the decline could begin. Only a close above $1,727 could cause doubts on our bearish view.
The wave counts are gradually hinting that a new impulse is in the offing. A possible corrective wave “C” has possibly ended at $1,523.
As mentioned earlier update a corrective move in the form of wave A-B-C could have ended at $1,523. A new impulse has begun with a potential to test $2,025-30 levels in the form of a fifth wave move.
A perfect confirmation of the same will be seen on a close above $1,785. However, a move below $1,690 has increased the possibility that the broad corrective consolidation in form of an “A-B-C-D-E” is in progress now. RSI is in the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD are still below the zero line of the indicator hinting at bearishness.
Therefore, look for gold futures to test resistances initially and then decline .
Supports are at $1,645, $1,625 and $1,565 and Resistances are at $1,685, $1,700 and $1,710.
(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.t@gmail.com. )