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Comex gold ended lower on Friday, as a dollar rally prompted investors to sell ahead of the weekend. Along with weak Chinese Trade data, the euro tumbled more than 1 per cent as fears over Greece's debt returned to the forefront. Weaker economic situation resulted in liquidation of assets. While gold is on the defensive presently, persistently low interest rates, concerns over euro zone debt and a weak outlook for the US economy could foster more optimism on gold. Longer-term investment interest in gold remains stable, with Exchange Traded Funds (ETFs) recording a 1.8-tonne increase on Thursday.
Comex gold futures are moving in a broad range. Failure to follow-through above $1,555 resulted in a decline once again. This puts the focus back on $1,510-15 levels again, where support is quite strong. This also happens to be a trend line support point as seen in the chart above. Near-term support is at $1,525 levels. While the support levels hold, we still expect prices to reach for potential trend channel resistance at $1,605-10. Although there are positive indications for the rally to continue, possibility exists for a sharp decline as prices have failed to cross recent highs at $1,577. Only a fall below $1,510 could revive hopes of a decline towards $1,445 levels again.
Our wave counts are now hinting at a final fifth wave to have begun. As we have been maintaining there is a possibility of the fifth wave to continue rising higher above $1,577 towards $1,600 levels. Therefore, we have modified our previous wave counts of a possible wave “A” which ended at $1,505. We will review these counts again if we see a sharp decline again. 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 and rise higher again.
Supports are at $1,525, $1,510 and $1,465. Resistances are at $1,545, $1,567 and $1,585.
(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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