Comex gold futures ended lower on Thursday slipping further away from a 13-month high hit last week, as Asian stocks and the US dollar firmed on expectations the European Central Bank will enact more stimulus to bolster euro zone economies.

Comex gold futures moved perfectly in line with our expectations. As mentioned in the previous update, the technical picture is turning friendly for gold and a possible trend reversal is in the making, as prices have crossed certain important levels. Prices have almost hit a high of $1,280 an ounce so far and a sharp correction from there has seen prices finding support near $1,240-45 levels presently.

As mentioned before, if prices can take a breather and consolidate for sometime, chances are good for a test of crucial resistance around $1,375 levels in the coming months. View remains the same in the coming week as well.

Any corrective dip is expected to find support at $1,235-40 levels followed by $1,227 levels now. Since, the trend is still showing positive signs, we would like to believe that, after the downside correction gets over, the upside momentum should resume. Only a fall below $1,225 could cause doubts on our bullish expectations. Such a fall though not expected, could see prices weakening towards $1,190 levels. Favoured view expects supports to hold and prices to edge higher again towards recent highs.

We will take a look at the wave counts now and understand the possible scenarios that can unfold going forward. It is most likely that the fall from the record high at $1,925 to the recent low of $1,088 so far, was either a possible corrective wave “A”, with a possibility to even extend towards $1,025-30 levels or a complete correction of A-B-C ending with this decline.

Subsequently, to this decline, a corrective wave “B” could unfold with targets near $1,255 or even higher. After that, a wave “C” could begin lower again. Alternatively, we can also expect wave “B” to extend to $1,476 levels. If the current decline as a whole from $1920 can be considered as a fourth wave, then the fifth wave could begin and cross $1,700 in the long-term. As prices have broken the key $1,140, we will now abandon this count. Once prices reach $1,025-45 levels we will look for any signs of reversal.

As of now there seems to be no major signs of turnaround, but momentum favours a short-term rally towards $1,350 levels. RSI is in the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD are still above the zero line of the indicator again, indicating a bullish reversal. Only a cross over again below the zero line could hint at a reversal in trend to bearish.

Therefore, buy Comex gold near $1,235 with a stop-loss of $1,224 targeting $1,265 followed by $1,285.

Supports are at $1,240, 1,225 and 1,190. Resistances are at $1,260, 1,285 and 1,325.

The writer is the Director of Commtrendz Research. There is risk of loss in trading.

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