Comex gold futures were higher on Thursday as equities took a hit from weak Chinese factory data and resulted in haven buying for bullion. Bullion had come under pressure earlier in the session as the dollar jumped to its highest in nearly three weeks before giving back some gains on expectations the Federal Reserve would hike US interest rates this year. But a sell-off in equities due to concerns over the Chinese economy provided support for gold in the Asian session. Gold’s outlook, however, continues to be mixed due to a looming US interest rate hike. The Fed continued its accommodative stance on interest rates last week but the US central bank has also said it would move to increase rates later this year. Higher rates would dent demand for zero yield gold, while boosting the dollar. Inflows into SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, supported prices on Wednesday. The fund’s holdings rose 0.18 per cent to 675.80 tonnes on Tuesday, the first inflow in almost a month.

Comex gold futures are moving moved in line with our expectations. As mentioned in the previous update, we still favour a possibility of an upward break. And in line with the price structure, there is a chance for the uptrend to resume higher once prices cross $1,130-35 an ounce levels. Immediate support is now seen at $1,115-20. Favoured view expects prices to push higher towards $1,165 or even higher, while supports hold. Below $1,105 the bearish momentum could build up once again threatening to break the recent low of $1,077 and heading towards $1,045, which is not our favoured view presently. Strong short-term resistance is seen at $1,135-45 range in this week and $1,155-65 subsequently.

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 $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 $1,920 can be considered as a fourth wave, then the fifth wave could begin and cross $1,700 in the long-term. We are more inclined to go with this as a favoured scenario. If prices do cross-over above $1,435, then this possibility will be confirmed. In the short-term though, prices are likely to be under pressure and could edge lower towards $1,025-45 levels.

RSI is in the neutral zone now indicating that it is neither oversold nor overbought. The averages in MACD have gone above the zero line of the indicator again, indicating a bullish reversal in trend again. Only a cross over again below the zero line could hint at bearishness.

Therefore, buy Comex gold on dips to $1,120 with a stop-loss of $1,103 targeting $1,155 followed by $1,168.

Supports are at $1,115, 1,098 and 1,077 and Resistances are at $1,135, 1,155 and 1,168.

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

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