Comex gold futures ended higher Fridayas fears over a worsening European debt crisis and sharp losses in equities and commodities sent the precious metal to its biggest weekly decline this year. Political uncertainty in Greece and a change of leadership in France this week had investors doubting whether Europe would come through with the billions of euros needed to bail out its troubled economies.Although last year gold tended to benefit from worries over the health of the euro zone, and moved higher with the dollar the inverse co-relation with it has once again revived. The Greenback and U.S. government bonds have taken over as the havens of choice. Investors may also be selling gold to make good for losses in the value of equities.

CHART

Comex gold futures are still seen in a volatile range. As mentioned in the previous update, a decline below $1610 could drag prices lower towards $1525-50 levels. Focus will turn to the next important support in the $1525-35 range. Failure to hold support here and a close below $1500 could see a potential test of $1450-55 levels being a Fibonacci retracement level. While resistances at $1610-20 caps upside attempts we can expect declines to the above mentioned supports. A rise above $1620-25 could hint at bullishness again. However, we do not favour such an outcome in the coming sessions.

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 oversold zone now indicating a possible upward correction in the coming sessions.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 support levels.

Resistances are at$1,620, $1655 and $1,675 and Supports are at$1555, $1,525 and $1,455.

(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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