Comex gold: Not too ‘bearish’ in the medium term

Comex gold futures, drifted lower on Thursday despite a weaker dollar as investors worried that US Federal Reserve minutes would highlight the prospect of further rate hikes. World stocks were flat amid growing anxiety ahead of Washington's end of week deadline to impose tariffs on Chinese imports.

Comex gold futures have hit key supports and bounced back perfectly in line with our expectations. Prices are likely to edge higher initially to $1,270-75 while $1,235 holds attempts to downside. As expected, more declines to $1,235 materialised where a strong rebound was also expected. The medium-term picture still holds some promise, therefore caution should be exercised on getting excessively bearish too. A positive trigger for the medium-term in sustaining the uptrend is likely to be above a close of $1,335 . In the short-term, we expect a pull back from present levels to $1,270-1,275 or even extend to $1,281 where good resistances can be seen again. Only a close above $1,300 could revive bullish hopes once again for $1,335 or even higher. However, unexpected fall below $1,235 could see prices testing lower levels at $1,200 before bouncing higher.

We will take a look at the wave counts. It is most likely that the fall from the all-time highs at $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 $1,025-1,030 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 $1,375 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. An eventual break above $1,355 could see the Wave "B" scenario emerge in the coming sessions. While $1,270 holds, we still favour prices rising higher towards $1,450-1,475 in the form of wave "B". We will reasses around $1,450-1,470 on the potential for a wave "C" decline subsequently. RSI is in the oversold zone hinting at a upward correction in the offing before more declines can be seen.

Therefore, Buy Comex gold on dips to $1,240-45 with stop loss at $1,230 targeting $1,270-75 followed by $1,289.

Supports are at $1,235, $1,225 & $ 1,210 and Resistances are at $1,275, 1,289 & 1,301.

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

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