Comex gold futures ended marginally lower on Friday but closed firm for the week, after government data showed slightly more-than-expected consumer prices in July, and retail sales showing hints of lingering economic softness. Bullion benefited from higher-than-expected US jobless claims and the Federal Reserve's downgrade of its economic outlook. Federal Reserve said US economic growth is slowing and it will revive its Treasury purchases. A rallying dollar also weighed down oil and metals and kept a lid on gold's gains. The dollar chalked up its best week in nearly two years against major currencies as the tepid consumer data fed fears that slower US growth would hurt the world economy. That fear boosted a safe-haven bid for the greenback.
Comex gold futures are moving in line with our expectations. As mentioned in the previous update, prices showed inclination to get back into the $1,200 zone. Prices have stayed above $1,200 comfortably for the whole week, and this will reinforce bullish expectations. Presently, prices found resistance in the $1,218-20 zone, being an important resistance in the past. Strong resistance is still seen in the $1,218-20 zone for the coming sessions. Only an unexpected rise and close above $1,220 could cause doubts on our overall bearish view and would force us to abandon it. There are signs that this rally could develop into a strong one taking out the recent highs. It will be confirmed once it crosses $1,235 on a closing basis. Till then we favour a consolidation in the $1,205-1,220 zone before the next push higher. There is a possibility of a fall even below $1,200 and while $1,190 holds, we can look for prices to edge higher.
Our wave counts are indicating that the impulse moves have ended and corrective ones have started and a close below $1,115 would validate this view.
Elliot wave analysis now indicates a possibility of a fifth wave impulse possibly getting over at the recent high of $1,266. A daily close below $1,135, will now confirm the beginning of a possible A-B-C, corrective move has started. The counts will need to be reviewed above $1,235.
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 indicating bearishness to be intact.
Therefore, look for gold futures to test the support levels initially and then rise higher in the coming sessions.
Supports are at $1,210, $1,197 and $1,185. Resistances are at $1,218, $1,227 and $1,238.
Gnanasekaar T.
(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.)
