Comex gold futures ended lower on Thursday on profit-booking. But the metal remained underpinned by positive pressure from a drop in stock markets and dollar weakness.

Comex gold futures moved perfectly in line with our expectations. As mentioned in the previous update, the consolidation still continues and our favoured view still continues to expect a move higher.

The technical picture is turning friendly while other assets have taken a sharp beating.

A possible trend reversal is in the making, as prices have crossed certain important levels. But, the medium-term picture still looks mixed. It is still likely that we will see prices consolidating in range between $1,075-85-$1,105 before pushing higher towards $1,120 an ounce followed by an important resistance at $1,140-45 level, being a strong falling trend line resistance level. Supports are seen at $1,080-85 followed by $1,070 levels now.

Unexpected drop below $1,070 could cause doubts about this mildly bullish expectation. And, below $1,045, more weakness is expected towards $1,020 or even lower to $975. We favour supports to hold and prices to push higher again breaking key resistances.

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 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 $1,255 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.

As prices have broken the key $1,140, we will now abandon this count. And as mentioned earlier, once prices reach $1,025-45 levels we will look for any signs of reversal. As of now, there seems to be no major signs of turnaround, but momentum favours a short-term rally towards $1,140-45 levels.

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

Therefore, buy Comex gold near $1,078-82 with a stop-loss of $1,067 targeting $1,120 followed by $1,140.

Supports are at $1,080, 1,067 and 1,045. Resistances are at $1,105, 1,120 and 1,145.

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

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