Comex gold futures rose to a five-month high on Friday, as investors bought the metal as a hedge against sovereign credit risk and economic uncertainties, while US crude oil marked its third straight monthly gain, on expectations for a U.S. economic recovery.
Gold tends to outperform other commodities in times of crisis.
Though sovereign risks in Europe will encourage a further strengthening in the US dollar, we expect gold prices will be able to benefit from rising inflows into physically backed gold ETFs.
US crude oil closed stronger for the third straight day as US government data spurred economic optimism. Energy markets were heartened as the first quarter US economic expansion growth data featured consumer spending at the fastest pace in three years.
Comex gold futures rose higher after testing support levels according to expectations.
Though the technical picture is bullish there is a hurdle at $1,188/1,189 levels in the near-term. Once above this it could open the way for $1,208/1,209. Supports near $1,171/1,172 or maximum $1,162/1,164 should be able to hold corrective retracements.
It has to fall below $1,150 to give up the bullish view. As mentioned earlier, we had to give up our bearish view for $975 earlier due to a positive close above $1,145. However, a close below $1,115 would re-kindle bearish hopes once again.
With the present move being impulsive in nature, it is highly unlikely that we could see a fall below $1,145 again.
Our wave counts still remain the same and will need a review on a close below $1,115.
Elliot wave analysis now indicates a possibility of a fourth wave corrective move possibly getting over at the recent low of $1,044.
A daily close above $1,145-47, has added hopes of a possible fifth wave like move towards higher level of $1285 or even higher towards $1,350.
RSI is in the overbought zone now indicating a possible downward correction in the offing.
The averages in MACD are above the zero line of the indicator indicating a bullish trend to be intact.
Therefore, look for gold futures to test the resistance levels.
Supports are at $1,173, $1,162, and $1,145. Resistances are at $1,189, $1,208 and $1,245.
