Comex gold futures were higher on Thursday but limited by dollar strength after Federal Reserve minutes suggested the United States is still likely to raise interest rates next year. Gold also fell sharply on Wednesday after a poll showed weaker support among Swiss voters for a referendum proposal that would force the central bank to boost its gold reserves. Selling by gold funds resumed after a brief pause this week.

Comex gold futures moved perfectly in line with expectations. As anticipated, favoured view initially expects a rebound to $1,185-90 an ounce levels. Prices have once again tested the psychological resistance at $1,200. However, if it fails to follow-through higher as cautioned earlier, could see another round of selling which could take prices lower to recent lows or even lower. Momentum in the short-term picture looks favourable for a push higher towards $1,235-40 levels.

Though short-term picture looks supportive for prices, the weekly picture still shows incredible weakness and any up move could prove to be a corrective rebound within a larger downtrend. Prices are seen moving in a narrow range after the recent pullback from lows, preparing for the up move or try to attempt testing resistances near $1,230-40 levels. Near-term support is seen at $1,175-80 levels now.

Failure to hold support here could further drag prices towards $1,145 levels, below which the downtrend is expected to continue further. Favoured view expects that while prices get supported near $1,170-75 levels in the coming sessions, one more attempt towards $1,230-40 levels is possible. Only a direct fall below $1,160 could see the decline accelerate further towards $1,100 levels or even lower.

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 present 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 a equality target at $1,020.

However, there are many intermediate levels from where good retracement can be seen. The $1,035-70 could prove to be a good intermediate support. Ideally, from this area, a pullback higher towards $1,300 looks likely.

RSI is in the neutral zone now indicating that it is neither oversold nor overbought. The averages in MACD are below the zero line of the indicator indicating a strong bearish reversal. Only a cross over again above the zero line could hint at hopes of a bullish revival. Therefore, look to buy comex gold initially on dips to $1,175-78 with a stop loss of $1,159 targeting $1,228.

Supports are at $1,175, 1,145 and 1,100 and Resistances are at $1,210, 1,230 and 1,245.

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

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