Gold: Overall picture bullish, shaky in the near term

Comex gold futures, rose for a second session on Thursday, lifted by a weaker dollar, worries about renewed trade tensions and volatile emerging markets.

Comex gold futures pulled back from recent lows. As mentioned in the previous update after the break of $,1301-05, the trend in the near-term is shaky and this zone could potentially cap upside attempts in the week ahead.

Despite many positive signs, the above zone is seen capping upside in the near-term. As hinted earlier, the overall picture is still bullish ahead, while crucial supports hold at $1,278. As we have been maintaining for a while, the medium-term picture still holds promise, therefore caution should be exercised on getting excessively bearish too.

From the bottom at $1,045 in December 2015, prices have been hitting highs so far, a clear sign of a rising trend, which has made us believe the bigger picture to be supportive despite strong corrective declines from time to time.

A positive trigger for the medium-term in sustaining the uptrend is likely to be above a close of $1,375 .

In the coming week we expect prices to gradually edge higher and find resistance around $1,305-10 and subsequently to decline to $1,278. Failure to hold here could drag prices even lower to $1,255-60 , from where prices are expected to bound strongly.

Our favoured view expects prices to edge higher to $1,302-05 . Only a close above $1,310 could revive hopes for a test of $1,325 or even higher.

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 likelyhood to even extend towards $1,025-30 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 $1,450-75 in the form of wave "B". We will reasses around $1,450-70 on the potential for a wave "C" decline subsequently. 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 cross over again above the zero line could hint at a bearish reversal in trend.

Therefore, Sell Comex gold on rallies to $1,305-10 with stop loss at $1,324 targeting $1,278 followed by $1,255.

Supports are at $1,285, $1,278 & $ 1,260 and Resistances are at $1,305, 1,325 & 1,355.

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

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