Buy Comex gold at $1,270/ounce

Comex gold futures steadied on Thursday after its biggest one-day drop in more than six weeks, finding support from a retreat in the dollar and concerns about North Korea and the French election. Comex gold futures moved perfectly in line with our expectations.

As mentioned earlier, prices hit our important resistance at $1,290-95 levels and paused there. The big picture holds promise for the rally ahead in prices. While above $1,270, chances exist for the prices to be stretching even higher to $1,305, followed by $1,330-35 .

A close above $1,305 is needed for the rally to extend further to $1,338-45. Only an unexpected dip below $1,262 might hint at the possibility of failure of this view.

Next supports would be near $1,242, followed by $1,220-25. Favoured view expects prices to push higher towards $1,305, while supports around $1,265-70 holds attempts to dips further. Only an unexpected fall below $1,224 could hint at weakness once again in the bigger picture and that it has turned bearish again.

We will take a look at the wave counts now and understand the possible scenarios that can unfold going forward.

It is most likely that the fall from the all-time highs at $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 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 $1,375 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. But, failure to follow through above $1,355 has dashed hopes of any impulsive up move.

As prices have broken certain important supports and show weakness targeting $975, we are tilted towards looking at this as a corrective wave C in progress. RSI is in the neutral zone now, indicating that it is neither overbought nor oversold. The averages in MACD are above the zero line of the indicator again, indicating a bullish reversal. Only a crossover again below the zero line could hint at a reversal in trend to bullish.

Therefore, buy Comex gold around $1,270 with stop loss at $1,261 targeting $1,305, followed by $1,330. Supports are at $1,270, $1,255 & $ 1,235 and resistances are at $1,295, 1,305 and 1,335.

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

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