Comex gold futures edged up on a weaker dollar, with investors looking to the outcome of a European Central Bank policy meeting later in the day for signs of an economic stimulus.

The futures moved perfectly in line with our expectations. As mentioned earlier, prices are expected to move with a negative bias, but the picture for gold has presently turned trend less. Once again charts are turning friendly.

A potential target lies around the $1,435-50 level, an equality target in the coming months. Initial resistance is seen at the $1,367-70 level now. Once above, prices could push higher towards $1,400 or even higher in the coming sessions.

As mentioned earlier, important support around $1,305 has been tested and we have seen prices moving higher from there. Only an unexpected fall below $1,320 could postpone the bullishness and such a fall could see prices testing $1,290-95, a strong trend line support level.

Below here, it could further become bearish for $1,255, which is not our favoured view. Dips to $1,325-35 are expected and an eventual rise above $1,400 looks likely. This is our favoured view.

Wave counts: It is most likely that the fall from the record $1,925 to the recent low of $1,088 was either a possible corrective wave ‘A’, with a possibility to even extend towards $1,025-30 or a complete correction of A-B-C, ending with this decline. Subsequent to this decline, 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. As prices have broken certain important resistances and shown impulsive tendencies, we will now stick with the above count.

And, as mentioned earlier, once prices reach $1,025-45 levels, we will look for any signs of reversal. There are signs of a turnaround, and prices have convincingly risen in volumes and closed above $1,300, which further reaffirms our wave count. RSI is in the neutral zone now indicating a that it is neither overbought nor oversold.

Below the zero line

The averages in MACD have gone below the zero line of the indicator again, indicating a bearish reversal. Only a crossover again above the zero line could hint at a bullish reversal in trend.

Therefore, buy gold on dips to $1,335 with a stop-loss at $1,317 targeting $1,367 followed by 1,400. Supports are at $1,325, 1,305 and 1,290. Resistances are at $1,367, 1,385 and 1,400.

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

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