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Comex gold futures firmed on Thursday as recent weakness tempted some price-sensitive buyers back to the market, but the gains were capped by a sharp rise in US Treasury yields, which underpinned the dollar and weighed on stocks.
From the bottom at $1,045 in December 2015, prices have been hitting highs so far, a clear sign of a rising trend that has made us believe the bigger picture to be supportive. A positive trigger for the medium-term in sustaining the uptrend is likely to be above a close of $1,275.
In the short-term, we expect prices to be in the $1,145-1,275 range or even extend to $1,120-25 where supports can be seen again.
Only a close above $1,275 in the bigger picture could revive bullish hopes once again for $1,335 or even higher. Prices have been moving in a narrow range, a typical phenomenon before a breakout happens either way, and in this case most likely on the upper side.
In the coming sessions, crucial support will come into play around $1,190-95 and we expect prices to stabilise and move higher towards $1,236, or even higher to $1,255. Only a fall below $1,180 could take prices lower to $1,160 or ideally to $1,125, which is not our favoured view.
Wave counts
It is most likely that the fall from the record $1,925 to the recent low of $1,088 so far was either a possible corrective wave “A”, with a possibility to even extend towards $1,025-30 or a complete correction of A-B-C ending with this decline.
Subsequently, 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 towards $1,450-75 in the form of wave “B”. We will re-assess around $1,450-70 on the potential for a wave “C” decline subsequently. RSI is in the neutral zone hinting that it is neither overbought nor oversold.
The averages in MACD are still below the zero line of the indicator again, indicating bearishness to be intact. Only a cross over again above the zero line could hint at a bearish reversal in trend.
Therefore, buy Comex gold around $1,190-95 with the stop-loss at $1,180, targeting $1,225 followed by $1,236.
Supports are at $1,180, 1,160 and 1,145. Resistances are at $1,212, 1,236 and 1,265.
The writer is the Director of Commtrendz Research. There is risk of loss in trading
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