Comex gold futures ended lower on Friday due to dollar strength, though volumes were exceptionally light for a market in holiday mode. Gold fell with the euro, which dropped against the dollar, with further declines likely heading into 2012. Worries about the debt turmoil in the euro-zone kept market participants nervous. Doubts also remain over whether this week's European Central Bank tender of half a trillion euros' worth of cheap loans will be effective in easing the strain for troubled euro zone economies. Gold prices remain on track for their first quarterly decline since the third quarter of 2008. For the year, they are up more than 13 percent.

CHART

Comex gold futures are moving in line with our expectations. As mentioned in the previous update,oversold conditions warn of a pullback towards $1625-35 levels in the coming sessions. However, subsequently prices could drop again. Failure to hold support near $1585could drag prices lower towards $1550 being a rising trendline support. Break below this could drag prices even lower towards $1450 levels being a Fibonacci retracement point as seen in the chart. Chances also existfor a push higher above $1655 in the coming session, while $1585-90 holds. Only a move above $1718 could revive bullish hopes again.

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 $1804. Fall below $1675 could hint at a beginning of the wave “C” targeting $1400 levels. Unexpected rise above $1810 could force us to review our wave counts.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 hold support and rise higher.

Supports are at$1,585, $1550 and $1,500. Resistances are at$1,625, $1,645 and $1,685.

(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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