Sell comex gold if it rallies to $1,160/oz

Comex gold futures were lower on Thursday hitting a four-month low as the Federal Reserve’s reiteration that US interest rates were likely to rise this year pushed the dollar index to a six-week high. Gold has lost its haven appeal during times of economic uncertainty, as the Greece debt crisis did little to boost the appeal.

Comex gold futures are moving perfectly in line with our expectations.

As mentioned earlier, the bigger picture in gold suggests downside pressure in the coming weeks. A close below $1,160-65 per ounce has opened the downside for gold futures. Resistances will be seen at $1,160-65 levels followed by $1,180-85 levels now.

Pullbacks to the above mentioned levels could come under pressure and prices could eventually retest the lows at $1,130-35 levels or even lower to $1,110. Close below $1,145 has triggered the decline, which we have been anticipating. Such a move could take prices lower again towards $1,135 initially or even lower to $1,100.

However, a convincing close above $1,185 accompanied by rising volumes could revive bullish expectations of a further move towards $1,257-60 levels, which is not our favoured view.

The wave counts need to be altered as prices move, but the overall trend looks weak and at present levels makes it difficult to take any directional call decisively. So, for now, we will stick to our previous assessment.

It is most likely that the fall from the record highs at $1,925 to the recent low of $1,130 was either a corrective wave “A” and a wave “B” is in progress with targets near $1,435 or even higher. It is also possible that the entire corrective A-B-C got over and a new impulse is in progress targeting $1,527-30 or even higher in the medium-term. If prices do cross -over above $1,435, then we can settle for the latter. Till then it looks likely that prices could edge lower towards $1,050 levels.

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, indicating a bearish reversal in trend again. Only a cross over again above the zero line could hint at a bullish reversal.

Therefore, sell Comex gold on rallies to $1,160 with a stop-loss of $1,186 targeting $1,135 followed by $1,110.

Supports are at $1,135, 1,100 and 1,075. Resistances are at $1,165, 1,185 and 1,205.

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

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