Comex gold futures endedhigher Friday, as optimism once again with riskier assets hoping that European leaders will be able to contain the region's debt crisis. Gold posted its biggest one-day gain in two weeks as Wall Street and commodities rallied after the euro zone's two biggest powers France and Germany said they would meet twice on Sunday and Wednesday to prevent the crisis from engulfing the entire 17-nation currency area. Gold has dropped 11 percent since the end of August as escalating debt woes threatened global growth and commodity demand. Despite this fall the metal has advanced 15 percent this year.

CHART

Comex gold futures moved lower against our expectations. Prices could not follow-through and then decline lower subsequently. As mentioned in the previous update, favoured view continues to expect that the upside attempts could fail near the resistance for a decline towards $1625.The decline could go as low as $1500 being a trend line support point or even lower towards $1455 being a Fibonacci retracement point. However, with positive momentum in the short-term, we expect a rise towards $1670/80 to begin with. It has to rise past $1695 to get stronger but at the moment it is difficult to visualize such a strong rally. Supports are near $1633/1628. It has to fall below $1620 to give up this bullish expectation.

The wave counts have to be revisited again as a possible fifth has ended. Potential targets for the fifth wave have already been met.Prices have gone above $1900 as an extension of the fifth wave. Fall below $1,600 confirmed that a corrective “A-B-C” has started.RSI is still in the neutral zone now indicating that it is neither overbought nor oversold.The averages in MACD arebelow the zero line of the indicatorhinting at bearishness to be intact. Only a cross-over above the zero line in the indicator again will signal the resumption of bullishtrend.

Therefore, look for gold futures to test the supports and then riser higher again.

Supports are at$1,635, $1620 and $1,585. Resistances are at$1,675, $1,700 and $1,730.

(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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