Comex gold futures ended mildly higher on Friday reversing early sharp losses, lifted by higher crude oil and US equities' following an encouraging US job report. Initial fears that further monetary easing looked unlikely from the data, gave way to renewed optimism on the economy resulting in the rise of all assets including gold and equities. Also lifting the metal was Greece's averting an immediate default after its bond swap offer to private creditors. However, lack of confidence in Europe to resolve its debt crisis continues to cap the upside for gold in the near-term. Due to the possibility of monetary easing in Europe leading to further inflation, gold still remains a good long-term bet.

Comex gold futures ended lower sharply against our expectations. As mentioned in the previous update, a fall below $1,705 could postpone the bullishness temporarily. Bigger picture still remains bullish despite the sharp fall during the week. As highlighted in the previous update, a decline could either continue to $1,650 or even lower and then resume the rally higher, or prices could consolidate in the $1,675-1,730 range and then breakout higher again towards $1,800 levels. This is still our favoured view. Only an unexpected decline below $1,660 could damage the bullish picture and bring back focus on $1,520-25 levels 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 $1,900 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 1,535 and a wave “B” ended at $1,804. A possible wave “C” has possibly ended at $1,523.This view has regained momentum as prices went above $1,710 on the upside and a new impulse is underway. However, fall below $1,660 could force us to abandon the present counts and review them again. RSI is in the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD are above the zero line of the indicator hinting that the bullish trend continues to be intact.

Therefore, look for gold futures to consolidate and then move higher.

Supports are at $1,675, $1,660 and $1,600 and Resistances are at $1725, $1,755 and $1,795.

(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.)