Buy gold if it dips to $1,298-1,302/ounce

Comex gold futures were lower on Thursday, retreating from this week’s two-month high as a firmer tone in equities suggested investors could be switching back into risky assets, abandoning haven gold. It has struggled to maintain gains, however, as higher prices curbed physical demand and investors stuck to the side lines, awaiting a clearer picture for the US monetary policy. China’s gold imports from Hong Kong dropped in May to the lowest level since January last year as a weaker yuan curbed appetite for the precious metal.

Comex gold futures moved higher as per expectations. As mentioned in the previous update, price structures favour a rise towards $1,297 followed by $1,305 or maximum to $1,330. Also, as illustrated in the previous update, though the underlying trend remains bearish, prices are hinting at a possible bullish reversal. Supports are noticed now in the $1,295-1,300 zone initially followed by stronger support at $1,285. Only a move below $1,264 could once again revive hopes of bears. A possible consolidation is underway with supports near $1,300-05 and resistance capping at $1,325-30. Technically, we favour a break above the consolidation range, targeting $1,332 or even higher to $1,355, as long as $1,285 holds.

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 now 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 overbought nor oversold. The averages in MACD have gone above the zero line of the indicator hinting at a bullish reversal. Only a cross over below the zero line again could hint at bearishness again.

Therefore, look to buy gold on dips to $1,298-1,302 zone with a stop loss at $1,283 targeting $1,330 followed by $1,355.

Supports are at $1,305, 1,285 and 1,265. Resistances are at $1,330, 1,345 and 1,365.

The author is the Director of Commtrendz Research and also in the advisory panel of Commodity exchanges and corporate houses. The author is not liable for any loss or damage, including without limitations, any profit or loss which may arise directly or indirectly from the use of above information.

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