Comex gold futures ended marginally higher on Friday, as equity markets rallied as EU leaders agreed to push for a deeper economic integration and as US consumer sentiment hit a six-month high. The European Central Bank cut interest rates for a second consecutive month to shore up growth, increasing the appeal of gold, which earns investors returns through price gains.

During the week, gold futures tumbled after the European Central Bank dashed hopes of more-dramatic action to fight the euro zone debt crisis. Although expectations of the return of safe-haven buying, due to the escalating debt crisis could keep prices underpinned, the positive correlation with equities presently continues to pressure prices.

Comex gold futures are still consolidating in a broad range. As mentioned in the previous update, another round of consolidation in the $1710-1765 zone could be seen before we see a move higher into the $1,800 levels again. Technically, the picture looks weak with prices failing to cross above $1,765-1,770 zone. Unexpected dip below $1,695 could dash our bullish hopes. And such a fall could take prices lower towards $1,660 initially or even lower towards $1,600 levels. However, we believe there could an attempt to test the $1,755-1,765 levels on the upside once again before a downturn occurs. Direct rise above $1,775 only could once again revive bullish hopes.

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 $1,900 as an extension of the fifth wave. Fall below $1,600 confirmed that a corrective “A-B-C” has started. It is possible that Wave “A” ended at 1,535 and a wave “B” ended at $1,804. Fall below $1,675 could hint at a beginning of the wave “C” targeting $1,400 levels. Unexpected rise above $1,810 could force us to review our wave counts.

The RSI is still in the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD have gone below the zero line of the indicator hinting at a bearish reversal. Only, a cross-over above the zero line again could hint at resumption in bullish trend.

Therefore, look for gold futures to test the resistance initially and then fall lower again. Supports are at $1,705, $1685 and $1,660. Resistances are at $1,735, $1,765 and $1,810.

(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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