Comex gold futures neared its one-week low on Thursday, pressured by a firmer dollar and uncertainty over the timing of a US Federal Reserve interest rate increase.

Prices on Thursday were pressured further by a stronger dollar, which weighs on gold. The recent rally in gold has been driven by a reduction in the market’s expectation of Fed rate hike during 2015, in turn a response to weaker US economic data. Physical demand from China has been supporting, but lacklustre demand from top consumer especially from rural areas has been hit particularly hard, as farmers suffer from the first back-to-back drought in India in three decades.

Comex gold futures are moving in line with our expectations. As mentioned in the previous update, either a close to $1,200 per ounce or around $1,230-35, prices are once again expected to come off lower from there. As mentioned earlier, charts have started turning friendly now.

But, gold futures prices seem to be finding it difficult to sustain at higher levels and has been languishing near the 200-day moving average near $1,175. Though, it still shows promise of crossing the important psychological resistance at $1,200, a possible decline to $1,145 looks likely before it takes out the important resistance levels.

Near-term supports are now seen at $1,145-55 levels in the coming sessions.

We favour prices to find supports in the $1,145-55 area and then rise higher again, but an unexpected fall below $1,140 could force us to abandon our bullish view. Such a fall could once again revive bearish expectations.

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 above the zero line of the indicator again, indicating bullishness to be intact. Only a cross over again below the zero line could hint at a bearish reversal.

Therefore, buy Comex gold near $1,150-55 with a stop-loss of $1,139 targeting $1,185 followed by $1,200.

Supports are at $1,145, 1,125 and 1,110. Resistances are at $1,185, 1,200 and 1,235.

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

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