Sell Comex gold on rallies to $1,227-30/ounce

Comex gold futures edged higher on Thursday, on a weaker dollar and lower US yields, with investors wagering that policy tightening in the United States would be glacial at best, though gains were capped by surging global stock markets.

Comex gold futures are moving perfectly in line with our expectations so far. As mentioned earlier, the technical picture is turning neutral to bearish in the short-term and support levels around $1,231 followed by $1,210 are expected to be tested in the coming sessions. Prices have hit $1,204 and bounced from there. But, any recoveries looks to be short-lived. Strong resistance will be seen at $1,225-30 followed by stronger one at $1,236-38. Direct fall below $1,207 could further push prices lower towards $1,195 or even lower to $1,177 in the coming sessions. Chances exist for an extension even to $1,150 , a potential target area in the coming months. Unexpected rise and close above $1,255 could cause doubts on our bearish expectations. Favoured view expects prices to edge lower towards supports mentioned above. The trigger for such a decline below $1,207 could hint at a resumption of the downtrend. It looks more likely that rallies to $1,225-30 to cap or maximum to $1,236 and then decline lower again.

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 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. 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. But, failure to follow-through above $1,355 has dashed any hopes of any impulsive up move. As prices have broken certain important supports and shows weakness targeting $975 , we are tilted towards looking at this as a corrective wave "C" in progress. 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 reversal in trend to bearish.

Therefore, Sell Comex gold on rallies to $1,227-30 with stop loss at $1,242 targeting $1,205 followed by $1,185.

Supports are at $1,210, $1,195 & $ 1,177 and Resistances are at $1,235, 1,255 & 1,265.

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

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