If gold rallies to $1,235-50/oz, sell

Gnanasekaar T | Updated on October 09, 2014 Published on October 09, 2014

Stop loss:$1,254; target: $1,175

Comex gold futures ruled higher on Thursday as the dollar fell after minutes of the last Federal Reserve policy meeting drove markets to push back expectations for the likely timing of an interest rate rise. It rebounded nearly four per cent from a 15-month low of $1,183.46 hit on Monday, under pressure from better-than-expected US jobs data. Minutes of the Federal Reserve’s September 16-17 meeting, released on Wednesday, showed that Fed officials want to tie an interest-rate rise to US economic progress. They, however, expressed concern about the dual threat of a rising dollar and economic slowdown in Europe and Asia, another factor behind its stance towards having an accommodative policy for the near future. However, holdings in SPDR Gold Trust GLD, the world’s top gold-backed exchange-traded fund and a good indicator for bullion investor sentiment, fell 5.38 tonnes to 762.09 tonnes on Wednesday – the lowest since December 2008.

Comex gold futures are moving on expected lines. As mentioned in the previous update, prices could be eventually breaking lower and heading towards recent lows at $1,180/ounce levels, being a crucial trend line support point. Currently, prices have pulled back higher, but since there is no clear sign of any reversal in trend, we continue to expect a break below $1,175 levels eventually. Only a close above $1,252 can raise doubts on our bearish view. Such a rise could take prices towards $1,260, or even higher to $1,275, where it can find strong resistance again. A close below $1,175 should open the downside further for an even sharper move lower towards $1,050 levels in the bigger picture. As cautioned in the previous update, it looks unlikely for a sharp fall immediately. Expect prices to get capped in the $1,235-40 range and decline again towards levels mentioned above.

The wave counts have to be revisited again. Fall below $1,250 has forced us to abandon any bullish hopes and look at a bearish one targeting $1,050. We feel the present set of moves from $1,175 to $1,435 is a corrective wave four in an impulse which began from the high of $1,920, with a equality target at $1,020. Ideally, from this area, a pullback higher towards $1,300 looks likely. RSI is in the neutral zone now indicating that it is neither oversold nor overbought. The averages in MACD are still below the zero line of the indicator indicating a bearish reversal. Only a cross over again above the zero line could hint at a possible bullish reversal again.

Therefore, look to sell gold on rallies to $1,235-50 zone with a stop loss at $1,254 targeting $1,175.

Supports are at $1,208, 1,175 and 1,145 and Resistances are at $1,235, 1,247 and 1,265.

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

Published on October 09, 2014
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