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

Gnanasekaar .T | Updated on: Apr 19, 2018

Comex gold futures dipped slightly on Thursday weighed down by a firmer dollar and a decline in global geopolitical tensions, breaking a string of gains for four successive sessions.

Gold hardly reacted much to the recent Russian sanctions and other uncertainties, while silver raced higher as it got extremely undervalued compared to gold.

Comex gold futures have been moving perfectly in line with our expectations. As mentioned in the previous update, prices are finding good support and consolidating in a range between $1,330 and $1,355 zone. Price structures favour a gradual rise after correcting lower from $1365, a previous resistance. No change in view. Near-term upticks could be capped in the $1,365 zone and a close above here could trigger sharper up move immediately towards $1,374 or even higher subsequently.

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. A positive trigger for the medium-term in sustaining the uptrend is likely to be above $1,375 levels. In the coming week, we expect $1,335-40 to hold for a push higher towards $1,365, opening the way for $1,374 levels or even higher to $1,400. Unexpected fall below $1,328 could see a sharp decline to $1,310 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 $1,270 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 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 bearish reversal in trend. Therefore, buy Comex gold on dips around $1,335-40 with the stop-loss at $1,325 targeting $1,374 followed by $1,395. Supports are at $1,340, 1,320 and $1,305. Resistances are at $1,365, 1,374 and 1,431.

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

Published on April 19, 2018
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