Comex gold futures ended higher on Friday regaining it safe-haven appeal as fears over a worsening European debt crisis and poor economic data from the US revived hopes of another round of quantitative easing. Euro, which recovered from four-month lows against the dollar, though concerns over a Greek euro exit and instability in the Spanish banking system weakened confidence. A report showed that manufacturing in the Philadelphia region unexpectedly shrank in May, the first contraction in eight months. However, it is too early to predict a reversal in the fortunes of gold, as more follow-thorough buying is necessary to encourage investors to get in once again.

Comex gold futures moved perfectly in line with our expectations. As mentioned in the previous update, focus will turn to the next important support in the $1,525-35 range. Prices have bounced quite impressively from here. It is the third time in almost a year that this level has held support. Initial resistance will be seen at $1,615-20 levels. Subsequent to that it can even rise towards $1,675 levels. Supports are now at $1,578 followed by $1,555 now. Failure to hold support here could drag prices a bit more lower towards $1,535-45 levels again. While supports mentioned above hold, we anticipate test of resistances at $1,615 followed by $1,657-60 levels in the coming week.

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 1535 and a wave “B” ended at $1,804. A possible wave “C” has possibly ended at $1,523.With the current price move going to $1,627, 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 indicating that it is neither overbought nor oversold. The averages in MACD are still below the zero line of the indicator hinting at bearishness to be intact. Only a cross-over above the zero line will hint a bullish reversal.

Therefore, look for gold futures to consolidate and rise higher once again.

Resistances are at $1,610, $1,655 and $1,675 and Supports are at $1,575, $1,555 and $1,525.

(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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