Comex gold futures ended higher Fridayas disappointing U.S. growth and European debt jitters boosted investment demand for the precious metal. Gold futures started rising after a report showed U.S. economic growth cooled in the first quarter as businesses cut back on investment. Some safe-haven demand also supported prices after a credit downgrade of Spain's sovereign debt by Standard & Poor's. Also, Federal Reserve Chairman Ben Bernanke said on Wednesday the U.S. central bank would not hesitate to launch another round of bond purchases to boost growth if necessary bolstered bullion markets.

CHART

Comex gold futures rose higher in line with our expectations. As mentioned in the previous update, while this support holds, chances exist for a push above $1675-85 levels in the coming sessions. Break above $1655 could be the first sign of such a move to happen. Important resistance is in the $1680-85 zone presently. A direct rise and close above $1685 could hint a possible early recovery towards $1700 levels or even higher to $1745 levels being a trend line resistance point as seen in the chart. Only a decline below $1625 would cause doubts on our bullish view. Such a fall could drag prices lower towards $1600 or even lower, but we do not favour this outcome.

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. A possible wave “C” has possibly ended at $1523.With the current price move going to $1627, 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 still below the zero line of the indicator hinting at bearishnessto be intact. Only a cross-over above the zero line will hint a bullish reversal.

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

Resistances are at$1,675, $1698 and $1,745 and Supports are at$1635, $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.)

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