Comex gold futures ended lower on Friday due to a stronger dollar disappointing US data and end-of-the-week profit-taking. Markets attention has turned to ratings agency S&P.

Downgrades in the credit ratings of France and a number of other European sovereigns weighing on precious metals.

The rebound in gold from recent lows is being threatened by a strengthening dollar, which rose to a 15-month high against six major currencies this week. China overtook India in the third quarter as the largest gold-jewellery market, according to the World Gold Council. Developments in Iran could continue to support the bullion complex, but the upside could also be capped due to the on-going Euro zone concerns.

Comex gold futures moved in line with our expectations. As mentioned in the previous update, a rise above $1,645 could drive prices higher again. Declines to $1,625 followed by $1,605-1,610 could well again for move towards $1,700 levels.

This is our favoured view. Only a decline below $1,585 could dash our bullish hopes and take prices lower again. Immediate resistance is at $1,675 being a trend line resistance as seen in the chart below. Big picture indicates that the recent low below $1,525 as a possible intermediate bottom and the uptrend could resume higher.

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 could gain momentum once prices cross $1,710 on the upside. The RSI is still 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 bearish to be intact. Only, a cross-over above the zero line again could hint at resumption in bullish trend.

Therefore, look for gold futures to test the supports and rise higher again.

Supports are at $1,625, $1605 and $1,585. Resistances are at $1,655, $1,675 and $1,705.

(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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