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Comex gold futures were sharply lower on Thursday after the Federal Reserve ended its bond-buying stimulus programme on an unexpectedly hawkish note. The Fed statement on Wednesday sent the dollar to its highest since October 6, while US rate futures shifted to show better-than-even chances of a rate hike. In the bullion markets, more producer selling and speculative selling is expected in the coming weeks on the back of heightened negative sentiment. In a reflection of investor sentiment, the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, said its holdings fell 1.2 tonnes to 742.40 tonnes on Wednesday, a six-year low.
Comex gold futures moved as expected. As cautioned earlier, though the short-term picture looks supportive for prices, the weekly picture still shows incredible weakness and the current upward movement could prove to be a corrective rebound within a larger downtrend. Also, a close below $1,219/oz has opened the downside again for a break below $1,180 and a subsequent move lower towards $1,050 levels in the coming months. Any pullbacks to $1,218-20 should find strong resistance in the coming sessions. Only a rise above $1,232 could cause doubts on our bearish view. Our favoured view expects resistances to cap for a decline below $1,180, targeting $1,145-50 initially.
The wave counts have to be revisited again. Fall below $1,250 has forced us to abandon any bullish hopes and look at a bearish one targeting $1,050. We feel the current set of moves from $1,175 to $1,435 is a corrective wave four in an impulse which began from the high of $1,920, with an equality target at $1,020. However, there are many intermediate levels from where good retracement can be seen. The $1,120-25 could prove to be a good intermediate support. Ideally, from this area, a pullback higher towards $1,300 looks likely. RSI is in the oversold zone now indicating a possible upward correction in the offing. The averages in MACD have once again gone below the zero line of the indicator indicating a strong reversal. Only a cross over again above the zero line could hint at hopes of a bullish revival.
Therefore, look to sell Comex gold on rallies to $1,220-25 with a stop-loss of $1,233 targeting $1,145.
Supports are at $1,195, 1,175 and 1,145 and Resistances are at $1,220, 1,235 and 1,255.
The writer is the Director of Commtrendz Research and there is risk of loss in trading.
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