Comex gold futures are hovering near five-week lows hit in the previous session, pressured by a stronger dollar and a rise in US Treasury yields. Markets are now waiting for the European Central Bank’s monetary policy decision later in the day.

Holdings of the largest gold-backed exchange-traded-fund (ETF), New York’s SPDR Gold Trust, rose 0.61 per cent on Wednesday from Tuesday.

Comex gold futures edged lower against our expectations. As mentioned in the previous update, failure to cross important resistances is likely to lead to another round of consolidation or decline before the resistances are taken out convincingly.

Failure to follow-through higher, despite many positive cues, has dented the confidence of the bulls leading to exit door temporarily. However, strong supports are seen around $1,307-10 per ounce levels. The overall picture still hints at bullishness ahead, while crucial supports hold. A positive trigger for the medium-term in sustaining the up trend is likely to be above a close of $1,375 levels.

In the coming week, we expect $1305-10 levels to hold for a push higher towards $1,365 opening the way for $1,374 levels or even higher to $1,400 subsequently. An unexpected fall below $1,305 could see a sharp decline to $1,300 levels again, which is not our favoured view.

Wave counts: 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, 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 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.

An eventual break above $1,355 could see the Wave “B” scenario emerge in the coming sessions. While $1270 holds, we still favour prices rising higher towards $1,450- 75 in the form of wave “B”. We will re-assess around $1,450-70 levels on the potential for a wave “C” decline subsequently.

RSI is in the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD are 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 bearish reversal in trend.

Therefore, buy Comex gold on dips around $1,305-10 with the stop-loss at $1,293 targeting $1,335 followed by $1,355. Supports are at $1,310, 1,302 and 1,295. Resistances are at $1,335, 1,355 and 1,374.

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

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