Look to sell gold on rallies to $1,308-12 an ounce

Comex gold futures ended near multi-month lows as the dollar rose on better economic data followed by outflows from gold funds. Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 1.80 tonnes to 816.97 tonnes on Wednesday after losing 2.70 tonnes in the previous session. Bullion has been under pressure recently, after hitting a six-month high of $1,391.76 earlier this month.

US Federal Reserve Chair Janet Yellen last week suggested that interest rates could rise in the first half of 2015, which dealt a severe blow to the recent rally in bullion on the back of geo-political tensions in Russia and Ukraine.

Comex gold futures fell from expected levels. As cautioned in the previous update, prices could now be inclined to test supports at $1,312/13 an ounce followed by important one at $1,285. Also, failure to cross the resistance identified at $1,340-42, in the earlier update accelerated the fall below $1,300.

Presently price structures are weak and the current fall has the potential to fall towards $1,263-65 levels from where some much needed support can be seen. Any subsequent pullbacks could find strong resistances at $1,317-20 followed by $1,340-44 levels. Only a close above $1,352 could restore bullish hopes again.

The wave counts have been modified once again. This happens most of the times with Elliot wave analysis, and tends to be confusing to lay investors following this concept. However, despite this short-coming this is one of the best forecasting techniques in existence.

We will now go with the alternative wave counts that we have considered broadly in our earlier updates. From the peak of $1,920 a corrective decline in the form of “A-B-C” is already over at $1,181 and a new impulse has begun. Confirmation of such an impulse will be seen above $1,445.Fall below $1,250 could force us to abandon this scenario and look at a bearish one targeting $1,095.

RSI is in the neutral zone now indicating that it is neither oversold nor overbought. The averages in MACD are still above the zero line of the indicator hinting at bullish to be intact. Therefore, immediately, one can look to sell gold on rallies to $1,308/12 with a stop loss at $1,343 targeting $1,264 or even lower to $1,255.

Supports are at $1,280, 1,264 and 1,245. Resistances are at $1,310, 1,344 and 1,365.

(The author is the Director of Commtrendz Research. There is a risk of loss in trading.)

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