Commodities

Comex gold futures consolidate; charts ‘friendly’

Gnanasekaar T | Updated on June 14, 2018 Published on June 14, 2018

Comex gold futures, hit a two-week high on Thursday, supported by a weaker dollar and trade worries between Washington and Beijing, even as the US Federal Reserve forecast a slightly faster pace of interest rate hikes this year. The US President Donald Trump will meet with his top trade advisers on Thursday to decide whether to activate threatened tariffs on Chinese goods.

The US Federal Reserve raised interest rates on Wednesday, and signalled two additional hikes by the end of this year, compared to one previously. Policy makers' fresh economic projections, also issued on Wednesday, indicated a slightly faster pace of rate increases in the coming months. They see another three rate increases next year, a pace unchanged from their projections in March. Individual Fed policy makers have expressed concerns about the economic risks of a broad tit-for-tat tariff retaliation, but have said they would not change their policies or forecasts until those risks are realised.

Bullish picture

Comex gold futures are still consolidating but the charts are turning friendly. As mentioned earlier, though, the overall picture still hints at bullishness ahead, the near-term has been neutral to mildly bearish hinting at further weakness ahead. 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 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 the medium-term in sustaining the uptrend is likely to be above a close of $1,375 levels. In the coming week dips could be held near $1,297/1,295 for a recovery towards $1,308 or even $1,315 area. It must dip below $1,292 to hint at the possibility of falling towards 1,278 again. However, rise above $1,315 levels could see prices testing the next resistance at and move higher towards $1,325 levels subsequently. Failure to cross $1,310-1,320 levels could drag prices lower again to $1,278 which is not our favoured view. Our favoured view expects prices to edge higher to $1,308-1,310 levels. Only a close above $1,335 could revive hopes for a retest of $1,365 or even higher. There is no clear directional move expected, but one needs to watch the break of $1,315 on the upside and $1,286 on the downside for further clues.

Wave counts

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 all-time highs at $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 $1,375 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 $1,450-1,475 in the form of wave "B". We will reasses around $1,450-1,470 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 below the zero line of the indicator again, indicating a bearish reversal. Only a cross over again above the zero line could hint at a bearish reversal in trend.

Therefore, Buy Comex gold on dips to $1,295-1,296 with stop loss at $1,286 targeting $1,315 followed by $1,325.

Supports are at $1,295, $1,285 and $ 1,260 and resistances are at $1,310, $1,325 and $1,355.

The author is the Director of Commtrendz Research and there is risk of loss in trading. He can be reached at gnanasekar.t@gmail.com.

Published on June 14, 2018
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