Comex gold futures ended lower on Friday, as an improving global economic outlook sent the haven metal tumbling. Friday's encouraging US housing data and signs of stability in the euro zone pressured gold. Gold came under pressure after data showed sales of new US single-family homes rose last year to the highest since 2009 despite a weak December.

Next week's Federal Reserve policy meeting and US employment data will likely set the tone for the gold market. Bullion investors are looking forward to next week's Fed Open Market Committee statement on Wednesday and nonfarm payrolls on Friday for more clues on US monetary policy and the state of the world's largest economy. Continuing economic-stimulus measures around the world, strong demand from central banks and slowing supply growth should provide long-term support for gold prices on dips.

Comex gold futures moved perfectly in line with our expectations.

As mentioned in the earlier week, we expected prices to bounce back higher towards $1,690-95 levels and price structures do not favour any major rise. As anticipated in the previous update, prices found resistance in the $1,695-1,710 range and then decline lower towards $1,640-45 levels initially or even lower. Initial support is at $1,645-50 levels and failure to hold support here could further take it lower towards crucial support at $1,625. Below here a decline to $1,565-75 levels looks likely.

Our favoured view expects prices to find a possible intermediate bottom near $1,550-65 range in the coming months. In the bigger picture prices are still in a broad consolidation after reaching all-time highs at $1,920. There is very good chance of prices testing $2,200-300 in 2013 while $1,520-25 remains undisturbed on the downside. Only a close above $1,727 could cause doubts on our bearish view. The wave counts are gradually hinting that a new impulse is in the offing. A possible corrective wave “C” has possibly ended at $1,523.

As mentioned in an earlier update, a corrective move in the form of wave A-B-C could have ended at $1,523. A new impulse has begun with a potential to test $2,025-30 levels in the form of a fifth wave move. A perfect confirmation of the same will be seen on a close above $1,785. However, a move below $1,690 has increased the possibility that the broad corrective consolidation in form of an “A-B-C-D-E” is in progress now. 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 bearishness.

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

Supports are at $1,645, 1,625 and 1,575 and Resistances are at $1,675, 1,695 and 1,710.

(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.t@gmail.com.)