Comex gold futures, are higher Thursday, a day after its best day in two weeks, buoyed by expectations that global economic and financial headwinds could make it tough for the US Federal Reserve to raise rates in the near term. Comex gold futures moved perfectly in line with our expectations.
As mentioned in the previous update, the technical picture is turning friendly for gold and a possible trend reversal is in the making, as prices have crossed certain important levels. But, the medium-term picture still looks mixed and above $1,148 even that could start indicating a positive change for gold. Presently, it is languishing near $1,148-50 levels. It looks like prices could inch higher towards $1,185-90 levels from here after a close above $1,150.
With the dollar looking weaker, it looks like we could see some support. Supports are now seen at $1,130 followed by $1,110-12 levels now. Unexpected drop below $1,095 could cause doubts about this bullish expectation. And, below $1,077, 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 resistance 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 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 $1,185 levels.
RSI is in the overbought zone now indicating a possible correction in the offing.
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 $1,132 with a stop-loss of $1,112 targeting $1,175-85.
Supports are at $1,130, 1,110 and 1,085 and Resistances are at $1,175, 1,195 and 1,210.
The writer is the Director of Commtrendz Research. There is risk of loss in trading.