Strong support seen at $1,462.5

Gold futures for June delivery closed at 1494.2 an ounce on Friday, largely in response to the gains made by the US dollar. After the recent weakness, prices are expected to trade steady to higher next week, but market participants aren’t expecting strong gains. Silver will likely remain extremely volatile, keeping traders in a wait-and-watch mode.

The June futures are expected to move in a narrow band next week, with the time price opportunities (TPO)-based target seen at $1,524.5, the market picture chart sourced from Bloomberg suggests. The MKTP chart shows higher TPO counts (54%) above the point of control (1,504-1,505), and hence, gold is expected to face strong resistance above that level.

The June futures declined sharply on Friday, from the day’s high of $1,517, to a low of $1,484, before recovering to close at $1,494. This intra-day fall is expected to take them around $1,471. Technically, near-term resistance for June gold is around $1,526.8. Support is seen at $1,460. Going forward, call option traders expect resistance above $1,510-1,525.

George Gero, vice president, RBC Capital Markets Global Futures, expects gold to trade steady to higher next week, as it still remained a haven. He said gold would be supported as the International Monetary Fund was now concerned the euro zone debt crisis would expand. Further, the US economy seems to be on the road to recovery, which could be supportive to gold.

If gold futures could take out the $1,527 high, that would suggest the correction was over, said Dave Toth, director (technical research), RJ O’Brien and rjomrt.com. If gold could not take out $1,527, and slipped under this week’s low of $1,462, there was a good chance it would fall back into the $1,425-30 area, giving bullish traders “a substantial risk-reward return”, he added.