Gold to Test Support

Gold to Test Support

 Comex gold futures ended lower on Friday, on track for their biggest weekly drop since the start of the month, with an uncertainty about crucial US talks to avert a fiscal crisis continuing to dent sentiment. Top Republican lawmaker John Boehner said on Thursday that the talks had made little progress, after expressing optimism about reaching a deal with the White House just a day earlier.

If the parties fail to reach an agreement, $600 billion in tax hikes and spending cuts – dubbed as the “fiscal cliff” – will automatically kick off in early January, threatening to push the world's top economy into recession.

However, if a breakthrough does emerge, gold would likely initially follow any bounce in risky assets and then decouple later.

Comex gold futures went lower against our expectations. Prices came close to our anticipated targets near $1,760-65 levels and then decline from there sharply.

Price structures are turning weak and bearishness gaining momentum again.

An important rising trendline support is at $1,700-02. A daily close below here could warn of a decline to $1,675 followed by $1,625 levels.

While resistance in the $1,725-30 range caps upside attempts, a decline to above mentioned levels look likely in the coming sessions. Only a close above $1,745 could hint at resumption in up trend. Once this resistance is cleared, prices could aim for the important psychological resistance at $1,795-1,800 levels.
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