Comex gold futures edged higher on Thursday benefiting from risk aversion as weaker oil prices dented stocks while the dollar retreated.

Comex gold futures have moved in line with our expectations so far. Prices found support at $1,240 and pushed higher again. As mentioned earlier, the technical picture is turning neutral to bearish in the short term and support levels around $1,245 followed by $1,210 are expected to be tested in the coming sessions. Strong resistance will be seen at $1,265-70 now.

Current indications hint at a pullback towards $1,265-70 initially, with chances of extending higher to $1,275. Failure to close above $1,280 could lead to loss of confidence in gold.

Such a move could see prices testing $1,237-40 again. An important trendline support at $1,220-22 could become a potential near-term target. Chances exist for an extension even to $1,195, or even lower to $1,177, a potential target area in the coming months.

The favoured view expects prices to edge lower towards the supports mentioned above. The trigger for such a decline below $1,240 could hint at a resumption of the downtrend.

Wave counts

It is most likely that the fall from the all-time highs at $1,925 to the recent low of $1,088 was either a possible corrective wave A, with a possibility to even extend towards $1,025-30 or a complete correction of A-B-C ending with this decline. Subsequent to this decline, a corrective wave B could unfold with targets near $1,375 or even higher.

After that, a wave C could begin lower again. Alternatively, we can also expect wave B to extend to $1,476 . 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. But, failure to follow-through above $1,355 has dashed hopes of any impulsive up move.

As prices have broken certain important supports and shown weakness targeting $975 , we are tilted towards looking at this as a corrective wave C in progress. RSI is in the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD have gone below the zero line of the indicator again, indicating a bearish reversal. Only a crossover again above the zero line could hint at a reversal in trend to bearish.

Sell Comex gold on rallies to $1,270-75 with stop loss at $1,282 targeting $1,245 followed by $1,220. Supports are at $1,245, $1,220 and $ 1,210 and resistances are at $1,270, 1,280 and 1,295.

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

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