Gold futures to correct lower

Comex gold futures ended lower due to an equity sell-off which triggered worries about a nascent recovery in the economic conditions. Gold prices posted their first weekly losses since the week of September 25, following four consecutive weeks of gains. The dollar rose on safe-haven buying after steep losses in the earlier sessions.

The gold trade is getting worried on developments about minor sale of Russian gold. The market also saw a series of higher gold production figures from some key miners earlier, but that news does not appear to be applying distinct pressure to gold prices. Investment in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, slipped 0.3 per cent this week as the dollar rebounded from a 14-month low against the euro.

Comex gold futures fell lower against our expectations. Corrective declines are expected towards $1,025-27, followed by a crucial support at $1,009-1,011, also being a rising trend line support point. In the near-term while below $1,055 we can expect prices to edge lower towards the support levels mentioned above. As we have been maintaining a bullish view for some time based on the big picture charts, we believe the bullishness to extend with some deeper corrections. As long as the crucial support at $1,009-1,011 remains intact, we feel gold futures could again inch higher towards $1085 or even higher towards $1,100.

Unexpected fall below $1007 could dent our bullish expectations.

Such a fall could take it lower towards $980 or even lower towards $928. Elliot wave analysis indicates a possible fifth wave move in progress. This has been confirmed above $978. A potential fifth wave target lies at $1,100. RSI is in 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 the bullish trend to be intact. Therefore, look for gold futures to correct lower initially and then rise higher again.

Supports are at $1025, $1,011 & $982. Resistances are at $1,055, $1,072 & $1,085.

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.)