Comex gold futures edged lower on Friday retracing gains made during the week as the dollar firmed against key currencies, with the Euro falling out of favour due to worries over Spain's financial health.

The metal is still on track to rise 2.4 per cent this week after a soft US jobs report last Friday stoked expectations for new quantitative easing measures.

A report released on Friday showed China's economy grew at its weakest pace in nearly three years in the first quarter denting risk appetite. Physical buying in Asia's bullion market slowed due to higher prices, but gold-buying festival(Akshya Tritya) in India in late April is likely to help bring in some demand from the world's top consumer of the metal.

Comex gold futures are still consolidating in a very broad range waiting for direction. Prices pulled back higher but failed to sustain. As mentioned in the previous update, chances exist for a decline below psychological support at $1,600. It could even accelerate further towards $1,555-60 levels too in the coming sessions. Important resistance is in the $1,680-85 zone presently. Only a direct rise above $1,685 could hint a possible early recovery towards $1,700 levels or even higher which we do not favour presently.

Our favoured view expects resistances to cap upside attempts for a decline again below $1,600 levels.

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 1535 and a wave “B” ended at $1,804. A possible wave “C” has possibly ended at $1,523.With the current price move going to $1,627, feel a broad corrective rally is still underway. We will review the counts once we see an impulse move either way. RSI is in the neutral zone now indicating that it is neither overbought nor oversold.

The averages in MACD are below the zero line of the indicator hinting at bearishness to be intact.

Therefore, look for gold futures to test the resistance levels.

Resistances are at $1,670, $1,685 and $1,710 and Supports are at $1,645, $1,620 and $1,600.

(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.)

(This article was published on April 15, 2012)
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