Comex gold futures ended higher on Friday as the safe-haven buying for precious metals returned when

data showed US consumers gloomy about the economic outlook.

For the week, gold fell around 2.5 per cent, its second straight and biggest weekly decline since May 2011. Bargain hunting from Asia however lifted the markets from its lows. Situation in Europe and negative US economic data continues to support gold prices. But, failure to follow-through higher is resulting in loss of confidence. Federal Reserve policy makers meet next week, and some investors expect them to announce a program to stimulate the economy and this could again result in revival of risk appetite and liquidation in the precious metals complex.

Comex gold futures are moving in a volatile range. As mentioned in the previous update, ideally, prices could decline as it finds strong resistance in the $1880-90 zone. Failure to follow-through from here is taking away confidence of the bull camp. Supports have been seen in the $1,765-1,770 zone presently. Dips to $1,785-1,765 could hold supports now. A push higher towards resistances at $1,835-1,845 levels looks likely in the coming sessions. However, we anticipate a strong decline below $1,765 subsequently.

Only a rise above $1,890 could dent our bearish expectations. The wave counts have to be revisited again as a possible fifth could be in the making again. Potential targets for the fifth wave have already been met. Prices have gone above $1,900 as an extension of the fifth wave. As of now we feel the fifth wave move has ended. However, a confirmation can be seen only below $1,600. Till then we stick to the continuance of the fifth wave.

The RSI is still in the neutral zone now indicating that it is neither overbought nor oversold. Negative divergence here warns of a strong decline ahead. The averages in MACD are still above the zero line of the indicator hinting at bullishness to be intact. Only a cross-over below the zero line in the indicator again will signal the resumption of bearish trend.

Therefore, look for gold futures to test the resistance levels and then fall lower again. Supports are at $1,800, $1765 and $1,700. Resistances are at $1,835, $1,848 and $1,895.

(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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