Buy gold if it dips to $1,335/oz

Comex gold futures rose on Thursday, as the dollar weakened and investors banked on the bullion as a hedge against inflation after data showed a rise in US consumer prices. Inflation fears boost gold, which is seen as a haven against rising prices. But expectations that the Fed will raise interest rates to fight inflation make gold less attractive since it is a zero yielding asset.

Comex gold futures are moving perfectly in line with our expectations. As mentioned in the previous update, prices could now consolidate in the $1,290-$1,320 an ounce levels before edging higher towards $1,352-55 zone. A crucial long-term trend line breakout at $1,343-45 has revived bullish hopes for $1,430-35 levels or even higher in the coming months. Immediate supports are in the $1,335-40 zone presently. Only a fall below $1,320 could postpone the expected bullishness. Such a fall could see prices testing the next support at $1,300-05 levels again. As we have been maintaining for a while, the medium-term picture still holds some promise, therefore caution should be exercised on getting excessively bearish too. From the bottom at $1,045 in December 2015, prices have been making higher highs so far in 2017, a clear sign of a rising trend, which has made us believe the bigger picture to be supportive despite strong corrective declines from time to time. A positive trigger for a sustaining up trend is likely to be above a close of $1,375. In the coming week we expect $1,335-40 levels to hold for a push higher towards $1,373-75 or even higher to $1,430 .

Wave counts: It is most likely that the fall from 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. But, failure to follow-through above $1,355 has dashed any hopes of any impulsive up move. As prices have broken certain important supports and shows weakness targeting $1,100 levels. But, a sustained move above $1,200 has once again revived bullish hopes and will make the necessary adjustments to the wave counts, as the prices break key resistance above.

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 reversal in trend to bearish.

Therefore, buy Comex gold on dips around $1,335-40 with the stop-loss at $1,319 targeting $1,374 followed by $1,430.

Supports are at $1,345, 1,320 and 1,305. Resistances are at $1,374, 1,395 and 1,435.

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