Comex gold futures ended lower on Friday as uncertainty on the outlook for the global economy dragged on prices. The euro zone debt crisis dragged the block into its second recession since 2009 in the third quarter despite modest growth in Germany and France, data showed on Thursday.

The markets are on their toes due to the looming “fiscal cliff” phenomenon, as it could push the US economy back into recession. Prices gained slightly on Friday as markets rose amid on-going missile strikes between Israel and Gaza.

Comex gold futures bounced back higher against our expectations.

As mentioned in the previous update, any declines now to $1,700-05 is expected to hold well and the rally to resume higher towards initial resistance at $1,760-65 levels. Once this resistance is cleared, then prices could aim for the important psychological resistance at $1,795-1,800 levels.

A consolidation in the $1,690-1,745 range is expected before prices clear the resistances. Unexpected fall below $1,660 could cause doubts on our bullish expectations. Favoured view expects that while supports in the $1,685-95 levels hold attempts to decline, prices could grind higher in the coming sessions towards resistances mentioned above.

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. 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. A new impulse has begun with a potential to test $2,025-30 levels.

A confirmation of the same will be seen on a close above $1,785. RSI is in the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD are still below the zero line of the indicator hinting at a bearishness to be intact.

Therefore, look for gold futures to consolidate and the rise again.

Supports are at $1,695, $1,665 and $1,645 and Resistances are at $1,740, $1,765 and $1,800.

(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 November 18, 2012)
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