Comex gold futures were lower on Thursday, as the dollar firmed, but remained near a three-week peak as a weaker yuan raised doubts about the pace of expected interest rate hikes by the US central bank.

Comex gold futures pulled back higher against our expectations.

As mentioned in the previous update, a break above the near-term resistance at $1,110 per ounce could likely see a minor pullback towards $1,125-26 levels in a corrective rebound. After several attempts of failure to go below $1,080, the patience of bears was put to test, and eventually they gave up on a move above $1,100.

Rise above $1,109 triggered a sharp rise as anticipated, possibly short-covering and profit-booking coupled with some bargain hunting. It is difficult to say if gold has seen a bottom at the recent low of $1,077. It still looks like an upward correction within a downtrend.

Only a convincing close above $1,155 accompanied by rising volumes could turn the picture to neutral again.

As of now, the present up move has the potential to stretch further towards strong resistances at $1,145-55 levels. Supports are expected around $1,109-10, followed by $1,095-97 levels.

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 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 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 below the zero line of the indicator, indicating a bearish reversal in trend again.

Only a cross over again above the zero line could hint at a bullish reversal.

Therefore, buy comex gold on dips to $1,107-09 with a stop-loss of $1,109 targeting $1,145-55.

Supports are at $1,109, 1,097 and 1,075 and Resistances are at $1,135, 1,148 and 1,160.

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

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