Commodities

Sell gold if it rises to $1,297-1,300/oz

Gnanasekaar T | Updated on July 31, 2014 Published on July 31, 2014

Stop loss: $1,315; target: $1,265



Comex gold futures were lower on Thursday on bleak optimism over the US economy despite the Fed re-iterating that is in no rush to raise interest rates. The main focus will be the US non-farm payrolls due on Friday, which is expected to show that US employers added 2,33,000 new jobs in July. Gold has been moving in a narrowest monthly range for the whole of July mainly due to a stronger dollar and an improving economy. However, sporadic haven buying had cushioned the fall. This is indicated in the way the holdings of the largest SPDR Gold ETF has remained unchanged.

Comex gold futures are lower according to our expectations. As mentioned in the previous update, we expected prices to get capped in the $1,315-25 an ounce zone and decline lower. Good resistance was seen in the $1,310-15 zone and subsequent fall below $1,300 has opened the downside for gold prices again in the short-term. Minor support will be seen in the $1,285 levels. Fall below $1,282 could expose gold futures to further downside targeting $1,265 being a strong trendline support point. Below here the fall could be very sharp targeting recent lows at $1,185 or even lower to $1,145 levels on the downside. However, while the $1,265 support holds, prices has the potential to gradually inch higher and take out the strong $1,355-65 resistance zone. But, this does not look likely at present and depends on how well prices hold at $1,265. Only a daily close above $1,330 could revive bullish hopes again.

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 below the zero line of the indicator hinting at a bearish reversal. Only a cross over again above the zero line could hint at revival of the bullishness.

Therefore, look to sell gold on upticks to $1,297-1,300 zone with a stop loss at $1,315 targeting $1,265.

Supports are at $1,285, 1,265 and 1,245 and Resistances are at $1,298, 1,315 and 1,330.

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

Published on July 31, 2014
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