Sell gold if it rallies to $1,267-70

Gnanasekaar T | Updated on June 05, 2014 Published on June 05, 2014


Keep stop loss at $1,287; target $1,225

Comex gold futures were lower on Thursday, facing the risk of more downside as the European Central Bank cut its deposit rate, making it the first major central bank to charge banks for holding cash. Theoretically, an ECB rate cut is expected to support gold prices as it is seen as a monetary easing measure which propelled gold prices to all-time highs in 2011. However, gold prices will be tracking the euro versus the dollar closely now, since the metal is priced in dollar and becomes expensive should the dollar strengthen further.

Despite sliding US Treasury yields and loosening of gold import curbs in India, gold prices have failed to find any positive momentum and because of this the metal’s outlook continues to be weak.

Comex gold futures are seen consolidating in a broad range moving with a bearish bias. As mentioned in the previous update, prices could further accelerate towards $1,245 or even lower to $1,220-25. An immediate target is around $1,220-25 levels. Failure to find support here could be seen a sign of weakness further denting sentiment. Subsequently, prices have the potential to even test $1,185-90 range. Mild oversold conditions prevailing in charts could see a pullback to resistances in the coming week. Resistances will be seen at $1,260 followed by $1,278 now. Only a move above $1,285 could lessen the chances of the expected decline to above mentioned levels.

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. However, despite this shortcoming 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 oversold zone now indicating a possible upward correction. The averages in MACD are below the zero line of the indicator hinting bearish to be intact. Only a cross over above the zero line could hint at a bullish reversal again.

Therefore, look to sell gold on rallies to $1,267-70 zone with a stop loss at $1,287, targeting $1,225 followed by $1,185.

Supports are at $1,225, $1,200 $1,185 and resistances are at $1,260, $1,270 and $1,285.

(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.)

Published on June 05, 2014
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