Commodities

Buy Comex gold at $1,280-85 / ounce

Gnanasekaar T | Updated on January 08, 2018

Comex gold futures rose to its highest level in two weeks on a softer dollar, with US inflation figures on Friday expected to provide more clues on monetary policy.

Comex gold futures are moving perfectly in line with our expectations so far. As predicted earlier, a direct rise and close above $1,297 could hint at further bullishness ahead. Prices bounced off from $1,260 lows and a quick retracement from there resulted in shorts getting trapped. It has hit $1,297 and looks set to cross the psychological resistance at $1,300.

As mentioned in the previous update, it needs to be seen if there is possibility of strong rebound from those levels subsequently. Price action has now indicated a possible intermediate bottom at $1,260. Prices are expected to inch higher towards $1,310-15 now.

Failure to follow-through higher from there could dent the confidence of the bull camp. Strong resistances are around $1,310-15 . A close above here could open the upside again to $1,330-35.

Bearish expectations

Unexpected decline below $1,278 could revive bearish expectations. Such a fall could see prices heading towards our potential bearish near-term targets around $1,240-45 again. The $1,240-45 is a very strong medium-term support and, therefore, we can expect a strong bounce or a retracement from those levels in the coming weeks. Favoured view expects prices to edge higher towards resistances mentioned above, and failure to follow-through higher could lead to sell-off 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 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 any hopes of any impulsive up move. As prices have broken certain important supports and shows weakness targeting $1,100. But a sustained move above $1,200 has once again revived bullish hopes and will make the necessary adjustments to the wave counts, as the prices break key resistance above.

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 again, indicating a bearish reversal. Only a cross over again above the zero line could hint at a reversal in trend to bullish.

Therefore, buy Comex gold on dips to $1280-85, with stop loss at $1267 targeting $1315.

Supports are at $1,285, $1,267 & $ 1,245 and Resistances are at $1,300, 1,315 & 1,335.

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

Published on October 12, 2017

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