TECHNICAL ANALYSIS. Buy Comex gold above $1,128/oz

Comex gold futures were lower on Thursday, but traders remained cautious as they awaited fresh clues on the timing of a US rate rise.

Comex gold futures are moving in a broad range with a bearish bias. As mentioned in the previous update, the drop from resistance levels has been sharp and casts doubts on our overall bullish view. The important support at $1,109-10 per ounce levels has been taken out.

As cautioned earlier, the strong resistance around $1,147-55 needs to be crossed in good volumes to confirm the continuance of the mild bullish trend towards next resistances at $1,195 levels. Immediate support is at $1,098 followed by $1,085. As of now, there is possibility for prices to move either ways depending on events unfolding next week. It is better to take any view on a breakout on either side of the broad range.

There is a chance for the uptrend to resume higher once prices cross $1,130-35 levels. Such a move could once again bring the focus back on recent highs. Below $1,095, the bearish momentum could build up once again threatening to break the recent low of $1,077 and heading towards $1,045. Despite, bearish nature of the gold chart, we still favour a possibility of an upward break. Strong resistance is seen at $1,135-45 range in this week and $1,165 subsequently.

We will take a look at the wave counts now. It is most likely that the fall from the record $1,925 to the recent low of $1088 so far, was either a possible corrective wave “A”, with a possibility to even extend towards $1,025-30 levels 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 $1,255 or even higher. After that, a wave “C” could begin lower again. Alternatively, we can also expect wave “B” to extend to $1,476 levels.

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. We are more inclined to go with this as a favoured scenario. If prices do cross-over above $1,435, then this possibility will be confirmed. In the short-term though, prices are likely to be under pressure and could edge lower towards $1,025-45 levels.

RSI is in the neutral zone now indicating that it is neither oversold nor overbought. The averages in MACD are still above the zero line of the indicator, indicating a bullish reversal in trend again. Only a cross over again below the zero line could hint at bearishness.

Therefore, buy Comex gold above $1,128 with a stop-loss of $1,110 targeting $1,165 followed by $1,185.

Supports are at $1095, 1,077 and 1,045. Resistances are at $1,115, 1,135 and 1,155.

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

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